Page 72 - RusRPTMay19

8.3 Stock market
8.3.1 Equity market dynamics
The share of foreign investors in the share trade on the Moscow Exchange stood at 50% in January–March, while their share in trade in derivatives amounted to 48%, CEO Alexander Afanasyev said in a news conference on Wednesday. “There is an assumption that there is an outflow of foreign investors from Russia. This is not the case, as almost half of the turnover on the stock market comes from foreign accounts, and the situation at the derivatives market is almost the same,” he said, adding that the combined investment of foreign funds in Russian companies stood at US $75.4bn as of the end of March. “The only region that significantly raised its ownership in Russia’s free float is the US, which is predictable. They are raising their share, it was at about 40% before the sanctions, while now it is at 54–55%.” The US and Canadian funds accounted for 54% of investment in Russian companies in January–March, while European funds accounted for 23%, and British funds for 21%, according to materials of the Moscow Exchange.
More than 300,000 new individual investors entered the Russian stock market since the beginning of the year, Interfax reports, citing the head of the Moscow Exchange Alexander Afanasiev. According to him, in 2018 the number of citizens and accounts opened by them with brokers increased by 50%. In total, 700,000 new individual accounts were opened last year. The number of individuals' accounts in January-March 2019 increased by 400,000 and amounted to 3.4 million. In the first quarter of 2018 the number of accounts increased by 140,000.
VTBC Research reported on the earnings outlook for the 1Q19 reporting season.
1Q19 is to show the first effects of all the amendments to oil industry regulation. Nevertheless, the key drivers of industry performance are likely to be the worsened macro environment and relatively sluggish operational performance, according to VTBC.
Rosneft’s top line is to be distorted by a 7% q/q decline in the crude oil price as well as a 3.4% q/q slide in crude production. VTBC expects Lukoil’s EBITDA to be down q/q on the back the relatively high base of 4Q18. Gazprom Neft’s results are to be pressured by weak operational performance and the poor profitability of domestic motor fuels sales.
Mild weather conditions in Russia and Europe in 1Q19 led to a decline in both domestic and export demand for Gazprom’s gas. Meantime, we see Novatek’s revenues up y/y, mainly due to continuing growth in LNG sales.
VTBC expects a solid performance from Sberbank, supported by CoR decline on the back of good asset quality and seasonal recovery in opex. Robust growth of retail loans supported TCS Bank’s performance, although we assume that the high cost of funding further depressed the bank’s net interest margin (NIM). VTBC forecasts a sharp increase in CoR to 8.6% amid the implications of the IFRS 9 approach, pressuring the bank’s bottom line.
Alrosa’s 1Q19 IFRS numbers are to be hit by weak rough diamond revenue and average realised prices, suggesting 30% and 47% y/y drops in revenue and EBITDA, respectively. Steels financials are to be under pressure of lower steel prices, which would be amplified by q/q lower sales volumes.
FY18 was a challenge for the airline industry with few remaining profitable – and Aeroflot was one of them. VTBC anticipate the trends of 4Q18 to continue in 1Q19: with further ruble depreciation, we see fuel costs rising 25% y/y despite lower oil prices.
72 RUSSIA Country Report May 2019 www.intellinews.com