News and Analytical survey

Russian market: respite is over

The Ministry of Finance is concerned by ruble strengthening and carries out verbal interventions to boost USDRUB rate, which, is about 10-12 percent “overvalued compared fundamental valuations”. Now oil barrel is valued about 2900 rub, which is 25% lower, than 4 years ago. Exporters and the budget receive less revenue, but nothing can be done with it: import in January contracted to $13.6 billion, while export exceeded $25 billion. Trade balance surplus remains at highest level since 2015. Because of it, Ruble was included into the three of the most performing currencies against dollar for the last 12 months.

Banks nevertheless accumulate foreign currencies, minimizing expectation of ruble appreciation, even as export maintains pressure on import. Oil price is near $51 per barrel, and in case of its further decrease, inflationary expectations would strengthen. The probability of monetary policy accommodation by Central Bank in spring is almost zero, and it prompts investors to ask for bigger yields in rubles or to be shifted into dollar assets as US Fed hike rates and low probability of growth for oil till summer. Money market rates are approximately 1 percentage point higher now than two-month ago.

Even upgrade of sovereign rating outlook to «positive» by S&P agency doesn’t heat up the market. There is a noticeable amount of fundamentally undervalued shares on market, such as giants like Gazprom and Rosneft. Not all dividend ideas are won back. However investors prefer to exit equity and to shift into Eurobonds, in hope that the time gap from forecast upgrade to rating upgrade will be not really wide.

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