Russian stocks mixed on stronger ruble, geopolitics Oct 17–21

MOSCOW, Oct 24 (PRIME) – The Russian stock market closed mixed in the week from October 17 through October 21 on the back of a stronger ruble amid a new tax payment period, as well as geopolitical fears, fruitless talks in the Normandy format and the decision to leave the European monetary policy unchanged, according to analysts.

The MICEX fell 0.44% to 1,957.70, and the RTS increased 0.34% to 986.37 in the reported week.

On October 17, the indices fell on the back of fears of a possible tightening of sanctions against Moscow, Timur Nigmatullin, an analyst at investment company Finam, said.

On October 18, the market rose due to positive dynamics on global floors and improvement of the geopolitical situation. Forex Club analyst Irina Rogova said that a rise in the U.S., European and Asian stock market futures supported Russian stocks, and InstaForex analyst Igor Kovalyov said that reports about Russian aviation ceasing attacks on Aleppo also encouraged purchases.

The dollar-denominated RTS rose due to a stronger ruble despite low oil prices and the MICEX fell insignificantly on October 19, when investors were waiting for the outcome of a meeting of the Normandy Four over the Ukrainian crisis and Syrian issues.

The negotiations failed and the stock market went down on October 20, amid lower global stocks which fell after the European Central Bank’s (ECB) decided not to change the E.U. monetary policy. On October 21, the indices closed almost flat in thin trade with neutral sentiment.

As seen in data of the Moscow Exchange, the ruble strengthened from around 63 against the U.S. dollar at the beginning of the week to about 62.4 by the closing bell on October 21. Analysts expect the ruble to rise further.

In the week from Monday through Friday, the MICEX is likely to be traded flat near 1,960, but at the same time, some increase of the ruble against the dollar is likely due to the coming tax payments’ peak, Nigmatullin said.

Yegor Dakhtler, an analyst at investment company Veles Capital, said, “Tax payments will peak on Tuesday and may exceed 600 billion rubles. The central bank continues absorbing liquidity and holds no repo auctions for many weeks in a row, and that is why tax payments will be accompanied by higher demand for ruble liquidity.”

The analyst believes that if the Russian central bank notes inflation risks after its monetary policy meeting, which is scheduled for Friday, it will cause an additional delay for a rate cut and be another factor supporting the ruble.

Russian stocks will likely be under pressure due to negative external conditions and lower oil prices, Dakhtler said. He believes that an oil meeting scheduled for Friday–Saturday will influence the global oil market.

“Representatives of OPEC, Russia and other oil producing countries will discuss a ‘road map’ and main cooperation measures to freeze oil output. Although we expect no key results of the meeting to be announced at the end of the week, oil prices may be put under pressure,” he said.

Rogova said that the U.S. will publish a range of important statistical reports this week, including data on gross domestic product (GDP) in July–September. “Strong statistic may increase expectations of a key rate hike, which may happen following a meeting in November already, and depress risky assets.”

CORPORATE STORIES

Metals and mining group Mechel was backed by higher coal prices, Nigmatullin said. The company soared 30.70% to 116.6 rubles per common share and 31.06% to 103.01 rubles per preferred share in the week from October 17 through October 21.

Russian coal producer Raspadskaya rose 9.81% to 62.44 rubles, although it published weak operating results for January–September and went down 1.56% on October 21. Raspadskaya’s coal concentrate sales fell 10% on the year to 4.556 million tonnes.

Russian hydropower giant RusHydro, whose electric power output rose 12.6% on the year to 94.117 billion kilowatt-hours (kWh) in January–September, jumped 4.57% to 0.79 rubles.

Grocery retailer Lenta was among companies which failed to publish operating results before the Federal State Statistics Service said the country’s retail food sales contracted 4.4% on the year in comparable prices in September, according to Nigmatullin. So, Lenta fell 4.31% to 488 rubles in the reported week, although the company released strong results for July–September on October 20. Lenta’s revenue grew 20.2% on the year to 75.4 billion rubles while the Russian food market rose mere 2.9% in the period, the expert said.

Preferred shares of Russian oil producer Bashneft revived 3.90% to 1,465 rubles. Earlier, the company fell sharply due to fears that oil major Rosneft will avoid making a buyout offer to Bashneft’s minority shareholders after buying a stake in the company from the state, Vitaly Manzhos, a senior analyst at Bank Obrazovanie, said.

The company’s preferred shares were supported by the news that Rosneft and the republic of Bashkortostan agreed to keep Bashneft’s dividend policy, Yevgeny Loktyukhov, head of the capital market analysis department at Promsvyazbank, said.

Grocery retailer Magnit, which reported a 17.63% decrease in its net profit in July–September under International Financial Reporting Standards (IFRS), and fell 0.75% to 10,525 rubles on October 21, nevertheless gained 3.76% during the week.

Oil and gas company Surgutneftegas, which has significant foreign currency reserves, went down 5.15% to 27.435 rubles per common share and 3.51% to 29.425 rubles per preferred share on the back of a ruble rise against the U.S. dollar. Loktyukhov said that a stronger ruble may cause the company’s forex losses and put under pressure its annual financial performance targets.

A higher ruble and Chinese statistic depressed a range of metal producers, the analyst said. Russian Depositary Receipts (RDRs) of aluminum producer UC RUSAL fell 3.97% to 213 rubles and Magnitogorsk Iron and Steel Works (MMK) went down 0.84% to 28.21 rubles.

Mobile operator MegaFon contracted 4.55% to 576.5 rubles per common share, because market players expected the company’s Global Depositary Receipts (GDRs) to be excluded from the MSCI Russia index due to low market capitalization, according to Nigmatullin.

Electronics retailer M.Video, which posted a 13.3% rise in revenue in July–September and a 16.7% rise in sales in January–September, increased 2.72% to 344 rubles.

Top Russian lender Sberbank gained 1.15% to 148.42 rubles on the back of a ruble strengthening against the U.S. dollar.

The Moscow Exchange lost 6.65% to 116 rubles last week. Georgy Vashchenko, director of operations on the Russian stock market at investment company Freedom Finance, said that the bourse was put under pressure due to a rise in tariffs and the relocation of its equipment to a new data center, which is expected to be completed on November 7.

REPORTING THIS WEEK

On Tuesday, steel producer Severstal will publish IFRS results for July–September. Internet giant Mail.Ru Group plans to release results under IFRS for January–September on Wednesday, before the start of the trading session.

Other companies reporting Wednesday include Russia’s X5 Retail Group, which will publish IFRS results for July–September and January–September, and power holding Inter RAO which will release results under Russian Accounting Standards (RAS) for January–September.

On Thursday, Russian Internet giant Yandex will report its financial results for July–September under the U.S. GAAP standards and meat producer Cherkizovo Group will publish operating results for January–September. On Friday, RusHydro will release RAS results for January–September.

Below are the MICEX’ five most active stocks from October 17 through October 21:

Company	Change, %	Last price, rbl	Trading volume, bln rbl
Sberbank	+1.15	148.42	24.383
Gazprom	-0.91	134.96	9.961
Lukoil	+0.23	3071.00	6.020
Magnit	+3.76	10525.00	5.801
Norilsk Nickel	-0.15	9376.00	4.702

(62.4499 rubles – U.S. $1)

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