Russian Equities Weekly 25-29/03/2019

03.04.2019

The Russian equity market fell last week amid talks about potential US sanctions on Russia. Bloomberg reported on Friday that the White House is considering a new package of Skripal-related sanctions and may impose them in the near future. The exact measures and restrictions to be imposed are not yet specified.

Magnifying eyes of sanction fear


Week 

YTD

RTS Total Return (TR) in USD      

-1.3%

12.4%

MOEX index TR in RUB

Composite

0.2%

5.7%

Blue Chip

0.1%

6.5%

Small and mid-cap

-0.7%

3.4%

MOEX sector index TR in RUB

Financial Services

0.8%

8.9%

Consumer Goods

0.8%

2.5%

Oil & Gas

0.2%

2.0%

Power Utilities

-0.4%

4.8%

Metals & Mining

-0.8%

2.9%

FX

RUB/USD

-1.7%

5.3%

RUB/EUR

-0.7%

7.9%

Data as of March 29th, 2019
Sources: TKB Investment Partners (JSC) calculations; Bloomberg



Russian equity market dynamics


The Russian equity market fell last week amid talks about potential US sanctions on Russia. Bloomberg reported on Friday that the White House is considering a new package of Skripal-related sanctions and may impose them in the near future. The exact measures and restrictions to be imposed are not yet specified.

Global markets ended last week almost flat. The MSCI World index gained 0.8% thanks to positive speculation around US-China trade negotiations; while the MSCI EM index slipped by 0.1%.

The financial sector outperformed last week thanks to Sberbank and the Moscow Exchange, their shares rising by 3.2% and 2.5% respectively.

Metal & mining companies lagged behind the rest of the market amid talks on cutting dividend payments at Norisk Nickel. Rusal, one of the main shareholders of Norisk Nickel, dropped 5.4% and Norisk Nickel itself dropped 3.9%.



Main Russian news


The Ministry of Finance (MoF) surpassed its federal loans plan for the first quarter. The first quarter of 2019 turned out to be successful for the MoF, as it was able to sell OFZ bonds amounting to 514 billion roubles, compared to 450 billion planned. The last time the MoF managed to achieve its planned value was a year ago, however the number of securities it could place was meanwhile decreasing each quarter. The main driver for OFZ bonds in Q1 of 2019 was the increased demand in government bonds of foreign investors. No change in interest rates in the US this year, no material effect of the sanctions on Russia and an oil price rise in the last few months have driven increased foreign investor activity of  in federal loan bonds. According to the Central Bank of Russia, the share of non-residents in OFZs in January-February* increased from 24.2% to 25.9% (the highest rate since last September).

The Mueller investigation found no conclusive evidence of conspiracy between Trump or his team and the Russian state during the 2016 US presidential election. This has decreased the probability of material sanctions on Russia. Proof of Russian interference in the US elections could have been a strong argument for material sanctions on Russia as it would have been a significant infringement of US democracy. “The investigation did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities”, states of the resulting investigation report. However, the results of the Mueller investigation do not affect the likelihood of immaterial sanctions.


* there is not yet any data for March



Author: Marina Tsutskiridze, junior investment specialist


To watch...


Globaltrans and Etalon are due to publish full-year 2018 IFRS results

Sources: Vedomosti, Bloomberg, cbr.ru, 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% 18.8%
     Gazprom 9% -12.3% 29.2%  
     Sberbank 12% -4% 4.5% 14.1%
     Novatek 13% 6% 20.5%  
     Tatneft 8% 33.7% 41.2% -18.8%
     Magnit -12% -19% 12.4%  
     MTS -8% -8% 13.6% -46.1%
     VTB 170% 7% -90.7%  
     Alrosa 64% 13% -10.9% -12.2%
     Severstal -14% 14% 0% -10.7%
     NLMK -4% 14% 12.3%  
     Moscow Exchange -7% -8%
4.2% 10.6%
     Magnitogorsk Iron & Steel -22% 6% 0% -20%
     Phosagro -31% -45% -8% -41.5%
 
* 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 29th, 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