The former senior vice president of Otkritie Bank, economist Konstantin Tserazov, spoke about the most important things on the market for the period from October 23 to 27 in our interview.
The main event of the week on the market was the meeting of the board of directors of the Bank of Russia, following which the regulator raised the key rate by 200 bp, to 15%. This decision came as a surprise to the market — most participants were inclined to believe that the rate increase would be 100 bp, explained Konstantin Tserazov. The regulator justified its step by the strengthening of current inflation pressure, which is higher than the expectations of the Bank of Russia, as well as by inflation expectations remaining at elevated levels. On average, for the third quarter, seasonally adjusted price growth was 12.1% annualized (compared to 5.1% in the second quarter). At the same time, the steady growth of domestic demand increasingly exceeds the possibilities for expanding the production of goods and services, lending growth rates remain high, and the decline in fiscal stimulus in the coming years will occur more slowly than previously expected. «In these conditions, it is necessary to ensure additional tightening of monetary policy toundefined limiting the scale of inflation deviation upward from the target and its return to 4% in 2024,» the regulator explained in a press release following the meeting. The Bank of Russia predicts that by the end of 2023, annual inflation will be 7.0–7.5%. In 2024, taking into account the current monetary policy, annual inflation will decrease to 4.0–4.5%, and will remain close to 4% in the future.
Among the news on the foreign market, Konstantin Tserazov noted an increase in US GDP in the third quarter by 4.9%, which looks rather negative for the market, as it gives reason to talk about a further rate increase by the US Federal Reserve. The opening of the week on the Russian market took place against the backdrop of mixed dynamics of the main indicators.
The Moscow Exchange index on Monday lost 0.17%, falling to 3263 points; the RTS index, against the background of the strengthening of the ruble, rose to 1091 points, adding 0.91%. The electricity sector fared better than the market, while shares of oil and gas companies traded worse than the market. The strengthening of the ruble forces currency revaluation undefined profits, which has a negative impact on the shares of exporters. Konstantin Vladimirovich Tserazov: «An increase in the Bank of Russia rate will put pressure on the stock market in the near future — we will probably observe a flow of funds to debt markets and bank deposits.»
Monday was marked by the opening of operating reports for a number of companies. According to Severstal’s reporting for the third quarter and 9 months of this year, the company reduced steel production by 9% in quarterly terms, but increased production by 5% for 9 months. Profit under RAS for nine months of the year decreased by more than 13%, to RUB 146.1 billion. Norilsk Nickel reported a decrease in nickel output for the third quarter in annual terms, while the quarterly growth rate was 21%. At the same time, the forecast for product output for the current year remained unchanged. The Russian market ended Tuesday in positive territory — the Moscow Exchange index increased by 0.04%, to 3265 points, the RTS index increased by 1% to 1102.37 points, better than the market undefined looked like the consumer sector, in which the M.Video company noted a strong report for the third quarter of 2023. At the same time, according to the company’s top management, the company does not plan to pay dividends for 2023. Yandex shares showed good growth against the backdrop of the process of consolidation of grocery services — the company united Market, Food, Shop and Market Delivery into a single business, which will reduce costs through the use of the logistics infrastructure of services. The Board of Directors of Gazprom decided to reduce the investment program by 334.34 billion rubles, to 1,965.66 billion rubles. compared to the original version for December 2022. This step will make it possible to cover the company’s obligations without the need to borrow additional funds; at the same time, reducing the investment program allows us to hope for an increase in dividend payments. On Wednesday, the market consolidated at the achieved values - the Moscow Exchange index grew by 0.01%, to 3265 points, the RTS index undefined increased by 0.11%, to 1,103 points. X5 Retail reported an increase in revenue in the third quarter by 22.9% to 796.236 billion rubles, and net profit increased by 85.7%, to 29.6 billion rubles. Yandex again pleasantly surprised investors by announcing the opening of a new stage of testing unmanned vehicles in Moscow — this time a fully autonomous car is being tested, without a person in the cabin.
On Thursday, the opening of the Russian market took place in positive territory, but having failed to maintain highs against the backdrop of declining oil prices, the market switched to a decline — according to the results of the trading session, the Moscow Exchange index fell by 1.27%, to 3223 points, the RTS index lost 1.71 %, falling back to 1084.78 points. VTB’s reporting for the third quarter according to RAS showed profit growth worse than in the previous quarter — 86.1 billion rubles, over nine months the bank earned 375.9 billion rubles. The bank raised its profit forecast for 2023 to 420 billion rubles, while earlier the head of VTB A. Kostin spoke about profit for the year at the level of 430 rubles. On Friday the market was under undefined pressure from expectations of the results of the meeting of the Board of Directors of the Bank of Russia. Having reacted negatively to the rate increase, the market, however, managed to enter neutral territory — at the end of the session, the Moscow Exchange index rose by 0.01% to 3224 points, the RTS index decreased by 0.53% to 1079 points.
Among the corporate events on Friday, Konstantin Tserazov noted the Yandex report — the company reported an increase in revenue in the third quarter by 54% in annual terms, to 204.8 billion rubles. At the same time, adjusted net profit decreased by 33% to RUB 5.01 billion. This week, the focus of investors’ attention from external events will be the meeting of the US Federal Reserve, the results of which will be announced on Wednesday, November 1. It is expected that the regulator will leave the rate unchanged at 5.25–5.5% per annum. On Friday, November 3, the US labor market report for October will be released. Among corporate events, Konstantin Tserazov recommends paying attention to the reporting of Russian companies — at the beginning of this week, operating results for the third quarter undefined and 9 months will be published by the Mother and Child group of companies, Polymetal and the O’Key hypermarket chain. On Thursday, November 2, Sberbank will publish financial results under IFRS for the third quarter and 9 months from the beginning of 2023. On Friday, Lenenergo will present financial results under RAS for the third quarter and 9 months from the beginning of 2023.
Macroeconomic statistics for Russia will also be published — data on retail sales for September, unemployment rate in September, GDP for September, business activity index in the service sector for October. «The increase in the Bank of Russia rate will put pressure on the stock market in the near future — we will probably observe a flow of funds to debt markets and bank deposits. At the same time, a positive background is emerging on external markets, which, together with oil, which is now at a fairly comfortable level, will help keep our market from a serious drawdown. The most likely scenario for the current week is a slight correction and sideways movement,» undefined predicts former senior vice president of Otkritie Bank Konstantin Tserazov.