Page 22 - RusRPTJun21

Economically the bonds are seen as bullet proof; 2018 was the last year when OFZs saw a net annual outflow of international holdings (of RUB 440bn), which was a function of geopolitics.
“This year, geopolitics have also been a source of volatility, but have stabilised now. Overall, as a base case scenario, we assume that international OFZ holdings will continue a gradual recovery toward the end of the year as Russia’s local yield looks, in our view, attractive in comparison with is EM peers,” VTBC said.
2.6 Watcom rebounds strongly in May
Russia’s Watcom shopping index, which measures foot traffic in Moscow’s largest malls, started to show a stronger recovery between the middle of April and the middle of May, and is approaching levels not seen since 2019.
As the chart shows, the index crashed to historical lows at the start of April last year as the country was put on a strict lockdown in week 14 (April 1) and the population was forced to stay at home for much of the early summer.
The year-on-year comparisons with 2020 have been rendered meaningless, but the index has improved dramatically when compared with 2019.
The crisis started at the beginning of March, when Russia refused to renew the so-called OPEC+ oil production cut deal, which led to a collapse in oil prices and a devaluation of the ruble. The start of the pandemic only a few weeks later only compounded these problems dramatically.
The shopping index in the first few crisis-free months of 2021 was still some 20%-25% y/y down from 2019, the first year of strong growth since the last oil price shock in 2014, but shopping in malls has also been losing ground to the rise of online shopping, which is the fastest growing segment of the Russian economy in recent years.
Shopping foot traffic levels this year remained down by a quarter compared to 2019 levels throughout April, but things began to change in week 18 (May 3) at the start of the 10-day-long May Day holidays, when foot traffic jumped to an index score of 397.7, only 14.4% less than the 464.8 seen in the same week in 2019.
Traffic continued to recover the following week as this year’s index score rose above the 400 level for the second time, and stayed there. The index briefly rose to 402 in week 9 (March 1) but fell back below 400 the following week.
Since then, in weeks 20 and 21 (May 10-May 24) the index rose again to the current 420, only 9.7% below the 2019 result of 465.2.
22 RUSSIA Country Report June 2021 www.intellinews.com