Page 114 - RusRPTJan21

Meanwhile, domestic retail investors kept piling into stocks as bank deposit rates hit their lowest levels in decades on the CBR easing cycle. During the year, despite the not-so-stellar performance of the Russian market, BCS retail clients managed to get a 6.6% dividend return based on their 2019-end average portfolio composition for a total return of 10.7%, 3ppt below the index.
The current portfolio of the ten most popular Russian stocks still hints at a defensive attitude, given the high representation of names such as SurgutNG prefs, Polyus and MTS. On the other hand, compared to the index, Yandex, Novatek, Polymetal, Rosneft and Tatneft – in the top ten by weights in the index – did not make it onto the top ten retail holdings list, which can be partially explained by the large part of legacy portfolios and long-time stock holdings. The five most popular stocks through the past three years were Gazprom, Sberbank and Lukoil, followed by Norilsk Nickel (made it to #2 this year) and preferred shares of SurgutNG. Healthy enough, the top five- and ten-names concentration of portfolios has fallen significantly through 2020 to add diversification to a typical retail portfolio.
Russia fundamentals are lagging those of other EMs due to market sector composition and the stronger pandemic hit in 2020 ​is a powerful factor to explain Russia’s relative underperformance in 2H20.
While the MSCI EM index is less than 10% away from the all-time high of 2007, the flagship Russia RTS index is more than 15% below the 2020 top level set in January.
High Russia dividends partially explain the underperformance – the 2020 dividend yield based on hefty 2019 profits exceeded 7%, and was the top one globally, but does not fully explain the lag.
The ever spreading COVID-19 pandemic in Russia is the major reason of this relative underperformance of Russia compared to top EM economies in Asia, primarily – the least scathed by the pandemic.
The fact that Asia, which accounts for c3/4 of the MSCI EM index, has managed to cope with the spread of the coronavirus best of all means the consensus expects only a 9% decline in USD-based profits for EMs in 2020. That compares with 48% decline in earnings for the RTS index – Russia is one of the heaviest hit countries by COVID-19. In 2021, earnings for the RTS index are expected to jump by the same 48% y/y versus 32% for the MSCI EM. Cumulatively, Russia will still lag EMs, as a result. The current consensus view on 2022 sees Russia earnings up 20% y/y, versus 16% for the S&P500 and the MSCI EM index.
114 ​RUSSIA Country Report​ January 2021 www.intellinews.com