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8.3 Stock market
8.3.1 Equity market dynamics
The Russian stock market was selling off heavily at the end of October on the back of jitter ahead of the US presidential elections and another drop in oil prices to $37 per barrel.
The market had been recovering nicely over the summer on the back of strong consumption as the lockdowns ended and oil prices rose to $45. The RTS index was up to 1,300, but still below its February high of c.1,600.
Consumer names and metals & mining in particular even managed to go into the black making their investors a real return of 3%-6% YTD. The rest of the sectors were down c.15%-20% while oil & gas was consistently the worst performer down c.30% but falling to -40% at the end of October.
The dollar denominated Russia Trading System (RTS) is basically flat and stuck at about 1,150 where it has been after recovering from the crash in March when the double whammy of an oil price collapse and when the coronavirus (COVID-19) pandemic began. The RTS index remains down by 25% this year as of October 22.
The story with the ruble denominated MOEX Russia Index is similar, but includes an FX element, where the exchange rates have been volatile this year. The MOEX index is down by 8% as of October 22.
However, digging into the details and the sectors are putting in different performances and a few individual names have managed to shrug off the crisis and actually produce healthy returns to investors.
Investors are largely remaining on the sidelines until the US presidential elections slated for November are over. A victor by Joe Biden looks increasingly likely and analysts are mixed on what that will mean for Russia. Biden is seen as something of a Russia hawk, but on the other hand at least he is sane, which will return some sort of predictability to forecasting. As both stocks and the ruble are very depressed due to sentiment at the moment, analysts are speculating that once the US elections are over there could be a mini-rerating of the market as stocks and bond prices take account of the end of the unpredictability that has come with the Trump administration.
There are early signs that some investors are already positioning themselves for the readjustment rally. As bne IntelliNews reported Russian residential real estate developer Samolet has just priced its IPO on MOEX that starts trading next week and is expected to be a success. As bne IntelliNews also reported the residential real estate sector has been booming on the back of a highly successful government mortgage subsidy that keeps effective interest rates for would-be homeowners at 6.5%.
94 RUSSIA Country Report November 2020 www.intellinews.com
