Page 84 - RusRPTJul20

8.3 ​Stock market
8.3.1 ​Equity market dynamics
Emerging markets (EM) stock markets are enjoying their strongest crisis bounceback ever, ​as coronavirus (COVID-19) infections stabilise and governments remove two-month-long lockdowns.
Economies around the world have been hit by the shock of the pandemic and many have also suffered from a concurrent oil price shock sparked when Russia walked out of the OPEC+ production cut deal on March 6.
However, as economies open up again and oil prices have broken above $40 after almost halving in price in the last two months, investors have turned “risk on” again and are snapping up cheap shares ahead of their inevitable rebound.
“At this point in the rebound, this EM rally is now the strongest of any of the big-5 EM sell-off rebounds (1998, 2001, 2008, 2016, 2020) and with US, DM and safer (particularly Asian) EM equity markets having less than 10% to go before reaching pre-coronavirus (Jan-Feb) 2020 peaks, investors are being forced up the risk curve in search of potential returns,” Daniel Salter, head of equity strategy at Renaissance Capital (Rencap), said in a note on June 10.
Russia is in the vanguard as one of the “safe haven” markets thanks to its low debt and large reserves, and the economy is already showing signs of a rebound. Rencap saw it coming and marked the whole Russian market up to Buy in the first week of May, in what is now starting to look like a classic call, as bne IntelliNews reported at the time.
“Judging by equity ETF flows, last week was the second best for Russian stocks this year. Overall inflows amounted to $72mn – the largest weekly intake since the first week of January. Moreover, net inflows into GEM equity ETFs also resumed at a reasonable pace for the first time since COVID-19 hit the tapes in January,” Vyacheslav Smolyaninov, chief strategist and deputy head of research at BSC Global Markets, reported on June 11.
84​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com