Page 89 - RusRPTOct21

8.3 Stock market
8.3.1 Equity market dynamics
While EMs sold off in the last days of September on China’s Evergrande collapse fears and in anticipation of a US rates tapper, Russia outperformed, the RTS climbing 1.2% on September 30 to 1,778, a new ten-year record.
There was a 5% gain for the month to top the performance table of liquid markets. Turnover continued to rise, reaching higher than $3.0bn for the blue chips. Financials remained the clear outperformer, while precious metals also bounced back and utilities fared well.ase metals and telecoms lagged. Over all the RTS is up c30% YTDut financials are up over 60%.
Russian stocks are the biggest overweight amongst EM investors in September. Institutional investors are positioning themselves in Russia. Russia has become the largest overweight for GEM funds. Yet foreigners' allocation to Russia has not changed much. On the stock level, funds were cutting exposure to value stocks to finance participation in IPOs and SPOs.
Russia is the largest overweight in GEM. Russia makes up 4.7% of GEM investor portfolios, versus its 3.5% weight in MSCI EM. Meanwhile, China remains the largest underweight, positioning that should prove favorable for fund managers in 2021.
Positioning in individual stocks. The preferences of institutional investors remain heavily tilted toward growth stocks. Yandex, Sber and Novatek are the biggest overweights, while Gazprom and Nornickel are the largest underweights.
Building supply-demand balance for Russian stocks. Foreign funds have slightly reduced allocations to Russia, pulling out $700mn since the beginning of 2020. In the meantime, local investors drought in $10bn, while corporates sold $11bn worth of shares in IPOs and SPOs.uybacks returned $1.7bn to the market. This calculation illustrates that it is not foreign funds,but local investors and corporates that are moving the needle in the new reality.
Stock-level flows. Share placements were the key driver for flows in individual stocks. Foreign investors were buying the IPOs of Ozon and Fix Price and the SPOs and ABBs of Yandex, Polymetal and TCS. In the absence of new allocations, they had to finance these purchases, selling down their largest positions in Gazprom, Sber, Nornickel and others. Local investors in turn were buying these names.
Outlook. We expect the supply-demand balance for the Russian market to remain the same in the future. Flows from local investors will likely continue, while foreign funds will allocate no new money to Russia. In the meantime, the IPO pipeline for the next 1.0-1.5 years suggests that stock supply will remain quite sizable. Most of the shares due to come to the market are from the new
89 RUSSIA Country Report October 2021 www.intellinews.com