Page 33 - Eastern Europe Outlook 2020

The outperformers in 2019 were utilities, which is going through a large reform, and financials, which both returned about 35% over the year. Analysts believe that both these trends will continue. Utilities is being driven by a global shift from fossil fuels to renewables and this trend will take years to complete. And financials is driven by the slowly improving macroeconomic environment and the slowly recovering real income. Telecoms had a late start and started to perform well in the second half of 2019 and that trend is likely to continue into the new year, say analysts.
“In addition to our preferences for Utilities (InterRAO is the top pick), Banks (Sberbank, Halyk) and Oils (Lukoil, Rosneft), we add the Internet sector (Yandex, Mail), as we sense more clarity for the sector overall. We have also added Qiwi to the list of most liked Telecoms (with MTS), and removed Rusal from the liked M&M (now Alrosa, KAZ),” BSC GM said in a note that also named Aeroflot, supermarket chain X5 Group and children’s toy store Detsky Mir as its top picks for 2020.
• Eurobonds
2019 was the biggest year for EM bonds versus stocks on EPFR Global’s records​. One could have noted a similar strong preference for bonds over stocks in 2011, but to a lesser extent. Since then, flows for these two asset classes have been positively correlated, with the exception of 2013 and 2018 when stocks were more liked than bonds – the reverse of 2019’s theme.
Russian corporate issuers are looking to increase borrowing through ruble bonds on the back of the CBR’s recent cuts in the key rate​, bankers and analysts surveyed by Reuters on November 29 believe.
The average ruble borrowing rates declined by 1.25pp as a result, and for many companies the difference became decisive. As reported by ​bne IntelliNews,​ Russianissuersalso​increasedEurobondissuanceinautumn 2019​.
33​ EASTERN EUROPE Outlook 2020​ ​ ​www.intellinews.com