Market Outlook

Last week the Russian equity market remained largely resilient to the fall in oil prices. The small contraction of the MICEX Index in rouble terms was more due to some large capitalisation stocks going ex-dividend rather than to pressure from oil price dynamics.
The Russian equity market continued to perform relatively well on the back of support from fundamental factors. Additional positive impact came from the results of the rather successful SPO of a diamond producer, Alrosa, which was announced in the beginning of last week.
Last week Russian equities resisted the pressure of the drop in oil prices. It looks like the fundamentally supportive factors help the Russian equity market to withstand short term volatility on the oil market. In our view these factors include the relatively high free cash flow/dividend yields for many Russian stocks, expectations for further rate cuts by the Russian Central Bank and expectations regarding elimination of the oil supply glut on the global market over the next 6-12 months.
Last week Russian equities and rouble were positively affected by the rebound of the oil price, with Brent price rising by 5% over the week in USD terms.
The Russian equity market benefited from the positive sentiment driven around the reduced likelihood of US rate hikes in July, and was relatively untouched by the turbulence in Europe in the wake of the Brexit vote, losing under 2% on Friday to close above zero for the week.
The Russian market ended the week in a positive territory mainly due to the support from expectations regarding the fresh rate cuts from the Central Bank of Russia (CBR). The market expectations proved to be correct – on Friday the CBR decided to cut rates by 50 bps.
The Russian equity market contracted a little last week following negative influence from the oil market on the news that OPEC members have not come to any decision regarding oil production freeze.