Russian Equities Weekly 25/02-01/03/2019

05.03.2019

The Russian equity market declined slightly last week in line with the overall EM market. The MSCI EM index fell 0.7% over the week. There was no additional pressure on Russia from oil price decline or from publication of the suggested law amendments regarding sanctions on Russia from the US. MSCI World rose by 0.5% thanks to positive speculation around US-China trade talks and the expectation that the trade deal is near.

Almost flat


Week 

YTD

RTS Total Return (TR) in USD      

-0.9%

11.4%

MOEX index TR in RUB

Composite

-0.4%

4.9%

Blue Chip

-0.5%

5.7%

Small and mid-cap

-1.3%

4.1%

MOEX sector index TR in RUB

Financial Services

0.5%

7.5%

Metals & Mining

0.2%

3.7%

Power Utilities

-1.1%

6.1%

Consumer Goods

-1.1%

3.1%

Oil & Gas

-1.7%

0.9%

FX

RUB/USD

-0.8%

5.0%

RUB/EUR

-1.5%

5.6%

Data as of March 1st, 2019
Sources: TKB Investment Partners (JSC) calculations; Bloomberg



Russian equity market dynamics


The Russian equity market declined slightly last week in line with the overall EM market. The MSCI EM index fell 0.7% over the week. There was no additional pressure on Russia from oil price decline or from publication of the suggested law amendments regarding sanctions on Russia from the US. MSCI World rose by 0.5% thanks to positive speculation around US-China trade talks and the expectation that the trade deal is near.

Companies in the financial sector outperformed mainly thanks to Moscow Exchange, Credit Bank of Moscow and Sberbank. Their shares rose by 2.3%, 0.7%, and 0.6%, respectively.

Oil and gas companies lagged the other sectoral indices mostly due to an oil price drop. The shares of Novatek, Surgutneftegas and Tatneft fell the furthest: by 4.7%, 3.5%, and 3.0%, respectively.



Main Russian news


The number of SME companies in Russia fell. According to the Federal Tax Service, the number of small and medium-sized enterprises in February shrank by 6.1% YOY and 7.3% YOY respectively. This is mainly due to a decline in real disposable incomes for the fifth year in a row, rising taxes, and increased inflation. The Russian Small Business Index (RSBI) fell under the 50 points mark in Q4 of 2018, which also indicates a decline in business activity in the sector. 

To improve the situation, the Ministry of Economic Development relaunched the program of concessional SME lending to ensure affordable financing for small and medium sized business. The interest rate for borrowers under the program is up to 8.5%, compared to 9.6-10.6% previously. According to the program plan, banks will issue concessional loans for 1 trillion rubles this year. The expected value of concessional loans to be issued by the end of 2024 is 10 trillion rubles.



Author: Marina Tsutskiridze, junior investment specialist


To watch...


Rusal and Lukoil are due to publish FY18 IFRS results

Rosstat is due to release macroeconomic figures for February 2019


Sources: Rosstat, cbr.ru, Bloomberg, TKB Investment Partners (JSC); March 2019



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


Major RTS index constituents     Q1 2018     Q2 2018     Q3 2018     Q4 2018
     Lukoil 9% 1%  22.3%  
     Gazprom 9% -12.3% 29.2%  
     Sberbank 12% -4% 4.5% 14.1%
     Novatek 13% 6% 20.5%  
     Tatneft 8% 33.7% 41.2%  
     Magnit -12% -19% 12.4%  
     MTS -8% -8% 13.6%  
     VTB 170% 7% -90.7%  
     Alrosa 64% 13% -10.9%  
     Severstal -14% 14% 0% -10.7%
     NLMK -4% 14% 12.3%  
     Moscow Exchange -7% -8%
4.2%  
     Magnitogorsk Iron & Steel -22% 6% 0% -20%
     Phosagro -31% -45% -8%  
 
* 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 March 1st, 2019

The above-mentioned companies are for illustrative purpose only, are not intended as solicitation of the purchase of such securities, and does not constitute any investment advice or recommendation