Driven by oil and the ruble

The Russian market rose significantly at the beginning of the month, driven by rising oil prices and a stronger ruble. The rise was led by major oil companies Lukoil and Rosneft. Carnegie Rysslandsfond rose in the period by 4.0 percent.

The uptick was clearly driven mainly by oil prices, and the buyers were ETFs. All the new flows have been to ETFs, and these have bought only the major share indexes.

There were numerous financial reports published in the month, and these were a real mixed bag. Some companies are doing very well in the current tough economic climate, while others have big problems. In the telecom sector, MTS and Rostelecom issued good numbers, while Megafon’s were weak. Megafon’s forecasts spooked the market, causing the stock to fall sharply. The reports from retailers X5 and Magnit were mixed. It is clear that Russian consumers remain weak, and an unexpected and very big bonus to the management of X5 also troubled the market. Dixy issued fairly poor numbers, which seems to be becoming a habit. Its EBITDA margin was only 4.9 percent, the lowest among listed Russian retail chains.

After much deliberation, the Federal Agency for State Property Management (Rosimushchestvo) submitted a final proposal to the government that dividends from state companies should be raised to 50 percent of net profit. There are many stakeholders that will actively lobby against the proposal, and full implementation is probably some way off, but it is still interesting to speculate what effects this could have on dividends from these companies. Those most affected are Transneft and Gazprom. Transneft’s dividend yield from would increase from 0.5 percent to 25 percent, and Gazprom’s from 5 percent to 15 percent.

The number of Russians living below the poverty line has increased by 3.1 million to 19.2 million. This is 13.4 percent of the population, and about the same number as during the financial crisis of 2008.

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Carnegie Rysslandsfond invests in equities listed in Russia and in other parts of the former Sovjet Union. The region has great natural resources as well as many excitingcompanies in newer...

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