Page 69 - RusRPTJul19

8.3 Stock market
8.3.1 Equity market dynamics
Russia’s leading dollar denominated Russia Trading System (RTS) has surged by just over a quarter (26%) YTD as of June 14. Stocks are now trading at a levels above where they were when sanctions were imposed following the annexation of Crimea in 2014.
The rise in share prices were led by the utilities sector, which is up 31% YTD on the back of an increasingly popular reform programme recently launched by the government. Russia’s market is now the second best performing in the world after Greece.
The financial sector has been leading the way for most of the year, overtaking last year’s star performer, the oil and gas sector, to become the most attractive sector for most of the first quarter. The metals and mining sector, which did well following the devaluation of 2015 as profits were boosted by falling ruble- costs, and the long standing investors favourite, the consumer sector, both seemed to have run their course.
However, even the less well performing sectors have all done very well this year with financials up 25% and oil and gas up 21% respectively, as the growth in share prices seems to be turning into a broader based rally.
Counter intuitively, the rally comes against the backdrop of soggy economic growth. The Russian economy stagnated in the first quarter of this year, growing only 0.8% in the first three months, well below even the most pessimistic forecasts.
However, the stagnation is ironically driving the growth of corporate profits amongst the leading companies. For most of the 90s and noughties the game was grow revenue as fast as possible and capture as much market share as possible as companies filled out the corners of the market.
That process has come to an end. In the retail sector, in particular, the leading
69 RUSSIA Country Report July 2019 www.intellinews.com