Page 104 - RusRPTSept21

from Russia-dedicated funds returned as well, although small in magnitude, just above $10mn. Nevertheless, it was enough to make the week second worst in 3Q21 in term of combined flows for Russian bonds. Negative.
The Russian stock market approached ten year highs not seen since March 2012 in the middle of August as the RTS index was just under 1,700. Russian stocks have been performing unusually well this year as geopolitical risks were partly quelled by the one-on-one summit between US president Joe Biden and Russian President Vladimir Putin in Geneva on June 16. As of the end of August the RTS had returned just under 20% with the banking sector leading the way that had returned over 50% over the same period.
Both leaders made it clear they want to walk back tensions and form a new, if not “friendly” relation, then at least a less adversarial one. Biden has made it clear he want to clean the table of numerous outstanding geopolitical headaches and concentrate fully on dealing with the rise of China that is rapidly emerging as America’s main rival on the world stage.
Also driving Russian stocks up is the combination of record corporate profits and the extremely generous dividends Russian companies pay – the highest in the world by a factor of two when compared to the MSCI EM benchmark. While the MSCI EM dividend yield average is on the order of 4% Russian companies pay a yield on the order of 7-8% and the state-owned blue chips have been ordered to pay out 50% of their profits as dividends and from this year all of them do.
Russian corporate profits extended their gains from the first two months of this year and made almost twice as much money in March as in any previous March since 2016, according to the latest Rosstat figures.
The enthusiasm for Russian corporate names is likely to continue into next year as those profits Russian companies are earning now will almost certainly be paid out to investors as generous dividends next summer, so analysts are expecting the rally to continue until at least Easter when the market traditionally sticks to the old saw: “sell in May and walk away.”
Corporates are doing well, but banking stocks are flying this year: the RTS is up almost a quarter, but banking stocks are up by almost 60%
104 RUSSIA Country Report September 2021 www.intellinews.com