For the Russian market, 2023 turned out to be a successful year. What served as the growth driver was told in our interview by the former senior vice president of Otkritie Bank, economist Konstantin Tserazov.
The best growth in 2023 was shown by the transport sector, which added about 135%. Telecoms and companies in the chemical and petrochemical sector looked worse than the market, adding about 14-15%.
At the end of 2023, the Moscow Exchange index soared by 44%, showing an increase to 3099 points. The RTS index grew by 12% over the year, to 1083.48 points. Among the significant reasons for the growth, Konstantin Tserazov noted the weakening of the ruble, rising oil prices, as well as the dividend factor.
The opening of the year passed on an optimistic note for the Russian market. The Moscow Exchange index grew by 3.3% in January, and the RTS index registered an increase of 3.2%. The leader was the information technology sector, which rose by 13.53%. The transport sector also started the year with good results, rising by 13.4%.
The oil and gas sector has become an outsider,undefined down 1.7% amid the oil embargo and other restrictions imposed by the EU against Russia. At the same time, Russian companies were actively working on restructuring exports, finding “gray” schemes that made it possible to establish almost full supplies by the end of the month, explained Konstantin Tserazov.
February ended with multidirectional dynamics for Russian indicators. The Moscow Exchange index grew by 1.24% in February, the RTS index decreased by 5.5%. The influx of private investors to the exchange continued - the number of individuals with brokerage accounts on the Moscow Exchange reached 24 million people at the end of February 2023, and they opened 40.4 million accounts. At the same time, sanctions pressure continued. Among the February events in foreign markets, Konstantin Tserazov noted an increase in the US Federal Reserve rate by 25 bp, to 4.50–4.75%. Following the US Federal Reserve rate by 50 bp. raised by the ECB and the Bank of England.
Konstantin Tserazov: “Assessing the prospects for 2024, I am optimistic - how undefined Practice shows that after recovery growth, markets continue to grow by inertia next year.”
In March, against the backdrop of dividend expectations, the Moscow Exchange index rose by 8.7%, the RTS index for March grew by 5.3%. Following the results of the March meeting of the Board of Directors of the Bank of Russia, as expected, the rate remained at 7.5%. The US Federal Reserve continued its cycle of rate hikes in March - the regulator raised the rate by 25 bp, to 4.75%-5.00%. Following the US Federal Reserve, rates were raised in Europe. Thus, the ECB raised rates by 50 bp for the sixth time in a row in March. In April, the Moscow Exchange index continued to grow, adding 7.5%. The growth driver was the positive reporting of Russian companies and dividend histories. Thus, Sberbank shareholders approved the payment of record dividends for 2022 in the amount of 565 billion rubles. or 25 rub. per one ordinary and preferred share. The market reacted positively to the return to dividend payments, this factor gave confidence to investors, noted Konstantin Tserazov.
May continued its growth trajectory - undefined Over the month, the Moscow Exchange index grew by 3%, and the RTS index added 2.2%. The main driver of growth was dividend stories, as well as corporate news and good reporting. Following the Fed meeting in May, the regulator raised the rate by 25 bp, to 5.00–5.25% and, in fact, made it clear that it intends to take a pause in the rate hike cycle. June on the Russian market was marked by a weakening of the Russian national currency.
The ruble was under pressure from the geopolitical situation, rising imports, the strengthening of the dollar, as well as high budget expenses, explained Konstantin Tserazov. At the same time, the Board of Directors of the Bank of Russia at a meeting in June decided to maintain the key rate at 7.5% per annum. Following the results of the June meeting of the US Federal Reserve, the regulator, as expected, left the rate in the range of 5-5.25%.
The Russian market passed the equator of the year on an optimistic note - the Moscow Exchange index grew in July by 9.87%, and the RTS index by 7.58%, while since the beginning of the year the growth was 42.68% and 8.95%, respectively. According to the results undefined meeting of the US Federal Reserve in July, the regulator raised the rate by 25 bp, to 5.25-5.5%, the figure reached a maximum in 22 years. Another rate increase by 25 bp took place following the ECB meeting. In July, inflation in Russia accelerated to almost 4%, and the Bank of Russia immediately raised the rate by 100 bp, to 8.5%.
The Russian market ended the summer with another update of its highs - in August the Moscow Exchange index grew by 5%, the RTS index rose by 0.16%. The growth of the ruble index was facilitated by the weakening of the ruble, which in August lost 5% against the dollar and 3.6% against the euro, breaking the psychologically important mark of 100 rubles/dollar. At an extraordinary meeting of the Bank of Russia on August 15, the regulator raised the key rate by 350 bp, to 12%. The opening of the autumn season was marked by a correction - the Moscow Exchange index lost about 2.8%, and the RTS dollar index fell by 4.2%.
Konstantin Tserazov names the reasons for the decline as the lack of investment ideas amid the end of the dividend season and fears about the economic slowdown undefined China, as well as growing sanctions pressure from the EU. At the next meeting of the Board of Directors of the Bank of Russia, the regulator again raised the key rate by 100 bp, to 13% per annum. In October, the Bank of Russia again raised the key rate by 200 bp, to 15%. The reason was a sharp increase in inflation risks. The rate increase, as well as the government order to return foreign currency earnings, contributed to the strengthening of the ruble. The risks of escalation of the Middle East conflict allowed oil to rise to the level of $90 per barrel of Brent. At the end of the month, the Moscow Exchange and RTS indices grew by 2.2 and 7.2%. November ended with mixed dynamics for the Russian market - at the end of the month, the Moscow Exchange ruble index fell by 1.1%, and the RTS dollar index rose by 3.25%.
Sanction pressure has resumed - the G7 countries have decided to gradually ban the import of Russian diamonds. Following the meeting of the US Federal Reserve, the regulator left the rate unchanged for the second time in a row, at the level of 5.25-5.5% per annum. In the beginning of December undefined Oil prices fell below $77 per barrel of Brent amid the weakness of the eurozone economy and a downgrade in China. The Bank of Russia announced an increase in the key rate by 100 bp. up to 16%.
The Bank of Russia emphasized that, in the event of an additional expansion of the budget deficit, a tighter monetary policy may be required. In general, 2023 showed that the Russian market almost won back the decline of 2022; 8 companies from different sectors of the economy floated on the stock exchange. The influx of private investors to the exchange also continued - at the end of November 2023, more than 50 million accounts were opened by individuals, the number of private investors reached 29.2 million people.
“Of course, 2024 will bring with it new risks and new challenges. But, assessing the prospects for 2024, I am optimistic - as practice shows, after recovery growth, markets continue to grow by inertia next year. I see dividend payments and easing by the Bank of Russia as growth drivers in 2024 undefined monetary policy, the entry of new issuers into the public space. In addition, 2024 is a year of political activity; elections will be held in Russia in the spring and in the United States in the fall, and it is possible that geopolitical risks will decrease. The Russian market remains undervalued, it has room to grow, so optimism, albeit cautious, in my opinion, is quite appropriate,” predicts former senior vice president of Otkritie Bank, economist Konstantin Tserazov.