Page 18 - RusRPTNov21

However, the market surged again this week, driven by easing political tensions and rising oil prices that crossed the $80 mark for the first time in years. At the same time investors have been buying into Russia’s national gas company Gazprom as gas prices have soared eight-fold since the start of the year.
In recent weeks portfolio investors have been taking profits in banks and reallocating their investments into oil and gas stocks, which gained 4pp this week to return 39% YTD and would have closed the gap with banking shares, except these soared as well to finish the week returning 70% YTD.
This is the second time the market has tried to rally. For most of the years since sanctions were imposed in 2014 following the annexation of the Crimea, and an oil shock that same year, the RTS has been range-bound between 900 and 1,300, but the best blue chips started to rally in 2018 when the Russian economy finally started to recover. Names like Russia’s biggest supermarket chain X5 Retail Group and the leading real estate developer PIK saw the value of their shares double that year. But in 2019 the rest of the market was being lifted as well and the RTS broke above 1,400 for the first time in five years at the end of the year.
2020 looked like the rally would continue, fuelled by Russian companies' proclivity to pay out the highest dividends in the world – twice the MSCI EM benchmark average. However, after yet another oil price shock struck in March, quickly followed by the start of the coronacrisis, the index collapsed to around 800, before recovering some of the ground lost during the summer.
Moods improved as the autumn arrived. The tête-à-tête between Russian President Vladimir Putin and US President Joe Biden in Geneva on June 16 did a lot to alleviate increased sanctions fears and reduce political risk. Then the announcement of effective vaccines that arrived in the following months promised an economic recovery in 2021 that set a new rally off, or at least a return to the previous rally in 2019.
In addition to the return of enthusiasm for Russian shares has been the push given as Russians turn to the stock market for the first time after the traditional store of wealth – high-yielding bank deposit accounts – saw returns fall to next to nothing after a six-year-long string of rate cuts by the Central Bank of Russia (CBR). As bne IntelliNews reported, SPB Exchange has seen an explosion of retail investors investing in stocks, including a large share going into international stocks as Russians seek to protect themselves from the volatility of the ruble.
Retail investors are also helping to drive the current rally and now account for some 40% of the daily turnover on the Moscow Exchange (MOEX).
International vs retail flows
The surge in the market in the last week has been remarkable, say analysts. Investment flows tracker EPFR Global released its fund flows data through the week ending October 6 and found Russian assets saw net circa $50mn inflows from combined equity and bond fund flows in the reported week vs circa
18 RUSSIA Country Report November 2021 www.intellinews.com