February 28, 2019
By Andrey Ostroukh
MOSCOW (Reuters) – Russia’s stock market is seen rising in the short term but sanctions against Moscow and global economic woes could trigger a temporary decline later this year, a Reuters poll of market experts found.
Russian stock indexes are likely to peak within a few months, then retreat below current levels before heading towards record highs next year, a consensus forecast of 10 analysts showed.
The dollar-based RTS index is forecast to rise 3.9 percent from Tuesday’s close of 1,193.07 to 1,240 points by the middle of the year, the poll showed. By the end of 2019, it is seen at 1,150, with forecasts ranging from 960 to 1,500.
Russian financial markets have proved vulnerable to swings in the oil price and geopolitical risks, particularly Western sanctions and the threat of more curbs to punish Moscow for what Washington calls “malign activities.”
Analysts polled by Reuters this month — after U.S. senators introduced a new bill on sanctions on Russia — highlighted that risk but predicted the rouble-based MOEX index would rise to an all-time high of 2,560 by mid-2019 before declining to 2,400 by the end of the year.
MOEX closed at 2,494.02 on Tuesday.
“With respect to Russia the key risk is geopolitical tensions … which we expect to be confirmed before mid-2019,” said Iskander Lutsko, chief investment strategist at ITI Capital.
“Hence the performance of the Russian equity market would decouple from the global trend,” Lutsko said, forecasting negative shocks from sanctions in the short term and a gradual recovery afterwards.
So far this year, RTS has gained 12 percent and MOEX 6 percent.
Sergei Drozdov, an analyst at Finam brokerage, said year-to-date gains were mostly driven by inflows of speculative money from Western investment funds.
He said U.S. Federal Reserve policy and tensions between the U.S. and China could trigger a serious adjustment on global stock markets, leading to a reversal of the speculative flows into Russian equity and debt markets. In such a scenario, he added, the MOEX could fall to 2,200 in March-April.
However, other analysts argued that the Russian economy and budget were now less vulnerable to external shocks than previously.
“I see no risk of capital outflow that could ruin the market this year,” said Georgy Vaschenko, head of capital market operations at Freedom Finance brokerage.
Vladimir Miklashevsky, senior economist at Danske Bank in Helsinki, said this year was likely to be broadly challenging for Russian stocks, with the exception of the energy and banking sectors.
Shares of export-focused companies also still look promising, said Mikhail Kuzin, head of the investment division at Raiffeisen Capital Asset Management Company in Moscow.
Analysts expect Russian stocks to rebound with MOEX rising to 2,570 by mid-2020 and RTS to 1,255, despite the uncertainty and gloom linked to risk of new sanctions remaining.
“2020 is a presidential election year in the U.S. and that could raise sanctions rhetoric and risk,” said Geldy Soyunov, chief analyst at Alfa Bank.
(Additional reporting by Elena Fabrichnaya; Editing by Kirsten Donovan)