Page 83 - RusRPTApr20

8.3 Stock market
8.3.1 Equity market dynamics
The RTS was back over 1000 as of March 27 having tested 930 the week before -- levels not seen since 2014 -- but remains highly volatile after a $1.4bn in a week outflow in March, the biggest on record.
However, after falling to around 930 the RTS seems to have found a floor. it can be expected to trade sideways now for a few months until the index will stage a modest and slow recovery, if previous crises are anything to go by.
At 1,000 the RTS is testing the lows struck in 2014 when the oil prices last collapsed. During that shock the RTS briefly dropped below 700 to hit a low of 667 on December 17, 2014, before recovering to trade between 750 and 820 until the middle of February. During the rest of the winter months of that year the RTS remained range bound between 850 and 950, before breaking out above 1,000 in March 2015.
For the rest of 2015 the RTS remains stuck in a band between 800 and 1,000 with a few regressions caused by new rounds of sanctions and tense politics in the wake of the annexation of the Crimea the year before. That kept the RTS at 1,000 or below for almost all of 2016 and 2017 too.
It wasn't until 2018 that the RTS began to rise to a new band of 1,100 to 1,300 as companies began to recover from the shock of the crisis years and investors began cherry picking the best names so that individual stocks like X5 Retail Group doubled in value.
This trend continued until 2019 when the recovery of the market became broad-based and the RTS climbed to 1,600 mark set in January this year to be the best performing market in the world.
Now the oil shock means the RTS have given up about five years of gain in just a few weeks and if previous form is anything to go by the RTS will recover a little from this dip but will take several months to find a new lower level and remain there until there is some clarity on oil prices and production deals.
Stampede out of EM bonds continues –
Russia-dedicated equity funds managed to see a symbolic $1mn in net inflows in the midst of global turmoil, while outflows from country-dedicated bond funds accelerated to a 7-year high. We see more room for outflows to continue from EM bonds (the multi-year favorite) vs stocks – we stay cautious on bonds, while market-neutral view on stocks looks more justified.
EPFR Global released fund flows data through week ending Wednesday March 25 showed Russian assets saw huge $840mn outflows from combined equity and bond fund flows compared to the all-time record $1.4bn in the previous one.
• Russia-dedicated: c$1mn in (vs $240mn outflows in the previous week) – best in 4 weeks
• Combined: c$270mn out (vs $640mn in the previous week) – 5th week of outflows Bond fund flows:
• Russia-dedicated: c$30mn out (vs $20mn in the previous week) – worst since June 2014
• Combined: c$570mn out (vs $760mn in the previous week) – 3rd worst in 10 years
83 RUSSIA Country Report April 2020 www.intellinews.com