Really strong reports, but Moscow exchange fell
The Russian stock market fell sharply in October. The decline was primarily driven by the global turmoil associated with Covid-19 and the US presidential election. In the case of Russia, the increasingly weak oil price also made a negative contribution. These lower oil prices also caused the rouble to fall. Carnegie Rysslandsfond fell 8 % this month.
To further strengthen its budget balance, the government has decided that all state-owned companies must distribute at least 50% of IFRS profits as dividends. Of course, this will also benefit minority shareholders in companies like Sberbank, Gazprom and Transneft, and will be positive for the market as a whole.
At its third reading, the Russian Duma approved higher taxation on the oil industry. This means an increased tax burden on the oil companies of more than RUB 200 billion per annum from 2021, which partly explains their recent poor performance.
Yandex’s attempt to buy TCS has been finally rejected. The companies each recently issued a press release to explain that an acquisition is no longer on the cards, but no real explanation was offered. Yandex’s share price fell on the news.
Many Russian companies published quarterly results in October, and quite a few of them look really good. Sberbank issued the usual nice numbers. Retailers X5 and Magnit also provided robust reports, and their business models are working well during the pandemic.
Internet companies Yandex and Mail are also doing well, and this was clear from their numbers. The same can be said for construction company LSR, which saw its sales increase by as much as 33 %. A little more surprising perhaps was to see steel companies MMK, Severstal an NLMK come up with really good reports. These companies have a fantastic ability to generate cash flow and pay high dividends over time. It was no surprise that gold companies Polymetal and Polyus provided good reports; the price of gold has risen fantastically during the year.