The Russian market in 2018 demonstrated that it has a sufficient margin of safety, which helped it quite successfully withstand the sanctions pressure. Konstantin Tserazov, an independent expert, economist, ex-deputy head of global markets at Troika Dialog, told how the year turned out for the domestic market and what to expect from 2019.
The trade war between the US and China, as well as the tightening of US monetary policy, have significantly reduced investor interest in emerging markets. Nevertheless, the dynamics of the Moscow Exchange index turned out to be one of the highest in the world, the economist emphasized. According to Otkritie Bank analysts, the Moscow Exchange index added 12.3%, while the RTS index fell 7.42%.
The year began with a strong rise in January, but then the market experienced two waves of sanctions. In April, the market was shattered by the US decision to impose sanctions against Russian businessmen and officials; the Moscow Exchange index collapsed by 8.3% in a day.
Konstantin Vladimirovich Tserazov: “The Russian market, with one of the highest dividend yields in the world, is still heavily oversold”
However, by the end of April, the index won back losses. Another package of sanctions was announced in August - the United States imposed restrictions on the purchase of Russian government debt and the supply of dual-use equipment from the United States. However, the market calmly accepted the new restrictions, believing that they were already priced in, and reacted weakly to the increased sanctions pressure, Konstantin Tserazov notes.
The main growth driver was oil prices, which in October crossed the level of $85 per barrel of Brent amid production cuts by OPEC+ countries, Venezuela's exit from the market and expected sanctions against Iran. It is logical that the leaders of the year were companies in the oil and gas sector - according to analysts at FC Otkritie Bank, the shares of NOVATEK rose by 65%, Tatneft - by 58%, LUKOIL - by 43%, Rosneft - by 40%, explains Konstantin Tserazov.
Agreeing with Otkritie Bank analysts that the Russian market is still largely dependent on oil prices, Konstantin Tserazov points out that 2018 showed a recovery in Russia's economic growth. The Russian market, with one of the highest dividend yields in the world, is still heavily oversold. With favorable market conditions, 2019 could become the most successful year for the Russian market,” Konstantin Tserazov concludes.
