What the week from October 16 to October 27 was memorable for on the stock market, what investors will face this week - former senior vice president of Otkritie Bank, economist Konstantin Tserazov, told us in our interview.
The opening of the week on the Russian market was on a positive note; on Monday, the Moscow Exchange index grew by 1.4%, and the RTS index added 1.2%. The leaders were securities of the oil and gas sector, whose quotes were steadily growing against the backdrop of rising oil prices. The shares of Rusagro showed good growth at the level of 4.2%, and shares of the Positive Group were among the outsiders on Monday.
Although global markets were down amid general uncertainty, fears of recession and ongoing tensions in the Middle East, the Moscow Exchange index rose 2.4% to 3,269 points, and the RTS index rose 4.5% to 1,081 points. Oil, which by the end of the week confidently consolidated above $90 per barrel of Brent, helped the Russian market resist negative external trends, points out Konstantin Tserazov.
On Tuesday, the indices showed multidirectional dynamics — the Moscow Exchange ruble index added a modest 0.38%, and the RTS dollar index lost 0.02%. Among the leaders, Rostelecom shares stood out against the backdrop of news about the recommendation of the board of directors to pay dividends in the amount of 5.4465 rubles based on the results of 2022. per share. The registry is scheduled to close on December 1. The market reacted positively to the statements of the head of the Russian Direct Investment Fund (RDIF), Member of the Transneft Board of Directors Kirill Dmitriev that the state supports the initiative to split Transneft shares in a ratio of 1:100. According to Konstantin Tserazov, such a step, by reducing the nominal share price, will increase the attractiveness of the company’s securities for a wide range of investors. Shares of X5 Retail Group, HeadHunter, RusHydro and Aeroflot looked worse than the market.
Wednesday on the Russian market was marked by a slight increase in the main indices — at the end of the day, the Moscow Exchange index strengthened by 0.06%, and the RTS index by 0.4%. Among the growth leaders were shares of Rosneft, Lukoil and preferred shares of Surgutneftegaz. The shares of ALROSA looked worse than the market, losing more than 5% due to the closure of the register for dividends. In addition, the company’s shares were negatively affected by statements that the West is preparing plans to ban Russian diamonds starting next year.
On Thursday, the speech of the head of the US Federal Reserve, George Powell, at the Economic Club of New York again made investors think about the possibility of continuing the regulator’s tight monetary policy. The Fed Chairman’s hawkish comments signaled to investors that a rate hike in November was unlikely to happen, but further rate hikes were likely. Having set a course to reduce inflation to the level of 2%, the department will remain committed to a tight monetary policy, while taking a «cautious» approach to changing the rate. Comments from Fed representatives also did not add optimism — thus, the head of the St. Louis Fed, L. Mester, emphasized that she is inclined to the need for another rate increase this year to 5.5-5.75%. At the same time, L. Mester made it clear that, in her opinion, the regulator is already «approaching the end» of the cycle of tightening monetary policy.
Konstantin Vladimirovich Tserazov: «Negativity on external markets, the strengthening of the ruble and the increase in geopolitical risks will remain serious factors of pressure on the domestic market. At the same time, high oil prices will keep the market from sinking.»
The Russian market spent Thursday consolidating at the achieved levels — at the end of the trading session, the Moscow Exchange index grew by 0.2%, and the RTS dollar index added 0.5%. The leaders of the day were shares of mining companies, which were boosted by the statement of Deputy Prime Minister Alexander Novak that Russia had increased supplies of energy goods to China by 17% in 2023. Against this background, Mechel’s shares soared by 6.5%, and Raspadskaya’s by 3.4%.
On Friday, Russian indices continued to grow — the Moscow Exchange index ended the week with an increase of 0.43%, and the RTS index soared by 2.34% amid the strengthening of the ruble. The greatest demand was observed in RusAgro receipts, which added more than 6.5%. The shares of MMC Norilsk Nickel showed good growth, strengthening by 2%.
During the week, a moderately negative mood remained on American and European markets, primarily associated with geopolitical tensions due to events in the Middle East. At the same time, the reporting season of the largest American companies continued, most of which are still showing results above forecast. The week’s disappointment was the report from Morgan Stanley — the bank showed an increase in revenue by 2.3%, to $13.3 billion, and a drop in net profit by 9%, to $2.4 billion. Another disappointment was the report from Goldman Sachs, which also ended the quarter with a drop in net income. profits — by 33%.
This week, the focus of investors’ attention from external events will be US GDP data for the third quarter. 2023, as well as a report on personal income and spending of Americans for September. Alphabet, Amazon and Microsoft will present their reports. The results of the meeting of the European Central Bank, which is scheduled to open on Thursday, will also become known — the market does not yet expect a rate increase; the regulator is expected to keep the key rate at 4.5%.
The Middle East conflict remains far from being resolved, although there has been some easing of the situation — Israel has not yet launched a ground operation, and humanitarian aid supplies have begun. At the same time, the risk of a new round of escalation of tension in this region remains very high, and developments will one way or another have an impact on the markets.
For the oil market, the Middle East conflict remains an important factor supporting high prices. At the same time, the easing of US sanctions against Venezuela may put pressure on the market in the long term, increasing supply by 200 thousand barrels per day. However, the supply shortage of raw materials from Venezuela will not be covered, in addition, the resumption of supplies will not take place earlier than next year, so oil will most likely continue its gradual ascent, believes Konstantin Tserazov.
For the Russian market, the main event will be the meeting of the Board of Directors of the Bank of Russia, which is scheduled to open on Friday, October 27. There is growing confidence in the market that the regulator can once again raise the rate by 100 basis points, to 14%.
Among corporate events, Konstantin Tserazov noted the publication of operating results for the third quarter of Lenta, Polymetal, Norilsk Nickel, Rusagro, TGK-1 and RusHydro. X5 Group will publish financial results under IFRS for the third quarter; Unipro, TGC-1 and RusHydro will report for the third quarter under RAS. On Tuesday, October 24, a meeting of the board of directors of Gazprom will be held, at which the investment program and budget for 2023 will be discussed, and on Thursday, October 26, issues of dividend payment will be discussed at the board of directors of Lukoil.
«The main idea on the market this week will be the expectation of reports from Russian companies and interim dividends,» predicts Konstantin Tserazov, former senior vice president of Otkritie Bank. — «Negativity on external markets, the strengthening of the ruble and the increase in geopolitical risks will remain serious factors of pressure on the domestic market. At the same time, high oil prices will keep the market from sinking. The focus will continue to be on the securities of oil and gas companies; the market will consolidate in anticipation of the Central Bank’s decision on the rate.»