Russian Equities Weekly 01-05/10/2018

11.10.2018

The Russian equity market fell last week. At the outset of the week, the market rose, as it had in the preceding weeks. However, it then reversed direction as the US, the UK and the Netherlands released new accusations against several Russian individuals regarding their alleged involvement in cyber intelligence operations. Due to the rouble depreciation amid the news the market decline in rouble terms was much less pronounced than in US dollar terms. The surge in the Brent crude price to new multiyear highs – by 1.5% in US dollar terms – failed to support either the market or the rouble.

Hampered by news of alleged cyber spies


Week 

YTD

RTS Total Return (TR) in USD      

-2.7%

5.1%

MOEX index TR in RUB

Composite

-1.0%

21.6%

Blue Chip

-1.0%

25.9%

Small and mid-cap

-0.4%

-10.5%

MOEX sector index TR in RUB

Oil & Gas

0.5%

48.9%

Metals & Mining

-0.5%

14.2%

Power Utilities

-0.8%

0.8%

Consumer Goods

-1.5%

-11.4%

Financial Services

-3.2%

-7.8%

FX

RUB/USD

-1.6%

-13.5%

RUB/EUR

-0.8%

-9.7%


Data as of October 05, 2018
Sources: TKB Investment Partners (JSC) calculations; Bloomberg


Russian equity market dynamics


The Russian equity market fell last week. At the outset of the week, the market rose, as it had in the preceding weeks. However, it then reversed direction as the US, the UK and the Netherlands released new accusations against several Russian individuals regarding their alleged involvement in cyber intelligence operations. Due to the rouble depreciation amid the news the market decline in rouble terms was much less pronounced than in US dollar terms. The surge in the Brent crude price to new multiyear highs – by 1.5% in US dollar terms – failed to support either the market or the rouble. 

Oil & gas stocks benefited from the rise in oil prices. The sector’s index was the only one that rose last week. Additional support for the oil and gas companies was provided by a relatively weak rouble, which is traditionally positive for export-oriented companies. The strongest performing stocks were those of Gazprom, Rosneft and Novatek, which grew by 4.9%, 2.0% and 1.3%, respectively.

Financials stocks underperformed. The decline in the sector’s index was driven primarily by Sberbank, whose stock dropped by 7.9% over the week. This stock is traditionally the most sensitive to news flows, such as those leading investors to consider increasing risks of new sanctions. Its price thus declined after the new accusations against individuals from Russia. In addition, the share price reacted to the media releases that Emirates NBD, the acquirer of the Sberbank Turkish subsidiary, Deniz Bank, intends to revise the terms of the sale agreement after the sharp depreciation of the Turkish lira.


 

Main Russian news


Inflation in Russia accelerated further in September. Consumer price growth rates reached 3.4% YoY in September compared to 3.1% YoY in August. All inflation components accelerated: food prices increased by 2.5% YoY compared to 1.9% YoY in the previous month; non-food goods prices rose by 4.0% YoY vs. 3.8% YoY in August; and services prices grew by 3.8% YoY vs. 3.7% YoY in the previous month. Despite food prices being the main contributor to the acceleration in inflation, they were in fact partly held back by falls in the prices of some fruits and vegetables.

Russian GDP growth was driven primarily by net exports in the second quarter. According to data published by Rosstat, the Russian economy grew by 1.9%* YoY in Q2 compared to 1.3% YoY in Q1. However, the dynamics of the key GDP components varied. Private consumption and investment slowed to 2.5% YoY and 1.0% YoY from 2.7% YoY and 1.8% YoY, respectively. Government expenditure rose by 0.6% YoY compared to 0.5% in the previous quarter. Net exports surged by 29% YoY, compared to the small 0.7% YoY increase in Q1. The net exports picture changed primarily due to the slowing of import growth to 2.8% YoY vs. 9.6% YoY in Q1, while export growth rates remained stable – at 6.8% and 7.5% YoY for Q1 and Q2, respectively.

*all figures are in real terms



Author: Artem Perminov, junior investment specialist


To watch...


No major corporate or macroeconomic releases are scheduled next week.


Sources: Interfax, Rosstat, TKB Investment Partners (JSC); as of October 2018



Quarterly results: Actual vs. consensus for EPS, adjusted (US dollars)*


Major RTS index constituents     Q1 2018     Q2 2018
     Lukoil 9% 1% 
     Gazprom 9% -12.3%
     Sberbank 12% -4%
     Novatek 13% 6%
     Tatneft 8% 33.7%
     Magnit -12% -19%
     MTS -8% -8%
     VTB 170% 7%
     Alrosa 64% 13%
     Severstal -14% 14%
     NLMK -4% 14%
     Moscow Exchange -7% -8%
     Inter RAO 53% 52%
     Magnitogorsk Iron & Steel -22% 6%
     Phosagro -31% -45%

* based on Bloomberg consensus

TBA – to be announced

  Actual figure is better than consensus by more than 5%
  Actual figure is worse than consensus by more than 5%
  The deviation of actual results from consensus is between -5% and 5%

Source: Bloomberg, TKB Investment Partners, data as of August 31, 2018