Russian indexes could not resist to external negative

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Last Tuesday, the main Russian stock indices Mosberg (-0.57%) and RTS (-0.62%) ended with a moderate decline relative to the levels of the previous closing. Members of the local trades could not and did not want to ignore the substantial deterioration of the external environment on the second half of the day. Major stock indexes in Europe and the USA, as well as crude oil futures showed an even deeper drawdown.
They were under pressure on lingering concerns about the possibility of a successful outcome to the trade negotiations between China and the United States. The recent announcement of Donald trump about the upcoming increase in import duties on goods from China will be brought to life. This decision will come into force this coming Friday.
We will add that against the local exchange of the bulls played some domestic news which can be assessed as indirect negative for the Russian stock market. It became known yesterday that GDP growth in Russia in March 2019 slowed to 0.6% in annual terms. In the 1st quarter Russia’s economy grew 0.8% in annual terms, against growth of 2.7% in the 4th quarter of 2018. In addition, the media reported that the American investment Bank Morgan Stanley decided to curtail its activities in Russia. This event is interpreted as a sign of deteriorating domestic business and investment background.
At the close of formal trading session, the June futures on the RTS index (RIM9) came to the state of backwardly value is 28 points, or nearly 2.2% against the baseline indicator. Futures market participants remain negative assessment of the medium-term prospects of the RTS index.
A notable drawdown index Mosberg held at the end of the day, the most liquid stocks ended mostly lower in the range of 1-2% relative to the levels of the previous close.
The most notable movement in the market was a sharp drop in the value of securities Bashneft JSC (the BANE of RM, -5.96%), Bashneft-up (BANEP RM, -8.44%). They opened with a strong gap down amid news of the amount recommended by the Board of Directors annual dividends. They will be 158.95 RUB for both types of papers, like a year ago. The recommendation was significantly below the average expectations of market participants.
And yet we saw not a rational reaction, but rather an emotional movement. The annual dividend yield on ordinary shares of “Bashneft” is 7.9% from yesterday’s closing price, and for preferred is about 9%. It is quite a decent figure in order to continue to hold the above securities in long-term and medium-term investment portfolios.
Weaker market looked like many other representatives of the oil sector: LUKOIL (LKOH RM, -1.32%), Gazprom (GAZP RM, -0.75%), Rosneft (ROSN RM, -0.71%), Tatneft JSC (TATN RM, -1.93%), Tatneft-AP (TATNP RM, -1.14%), RussNeft (RNFT RM, -1.95%). They were under pressure amid falling oil prices. Yesterday futures for Brent crude returned to the nearest significant psychological and technical price level of $70 per barrel. As usual, the price of “black gold” are under the influence of a large number of conflicting signals and trends.
One of the most objective indicators for them are the official statistics weekly change in crude oil inventories in the United States. Last week they increased to a peak in September 2017. Another publication of weekly data from the US Department of energy will take place tonight. By the way, yesterday’s report by the American petroleum Institute (API) has pointed to further growth of hydrocarbon reserves overseas by 2.8 million barrels.
Significantly stronger than the market was closed the papers of a number of electricity companies: rosseti JSC (RSTI RM, +1.31%), Russian grids Pref (RSTIP RM, +1.72%), OGK-2 (OGKB RM, +3.37%), Mosenergo (MSNG RM, +2.87%), MRSK of South (MRKY RM, +3.05%), MRSK SK (MRKK RM, +4.78%). Incentive for promotion of purchases in the shares of Mosenergo and OGK-2 reports of issuers regarding the recommended size of annual dividends. In General interest to the representatives of the electricity sector usually manifests itself in moments of relative calm and lack of fresh trading ideas on the market.
Before you start trading in Russia the futures for US stocks were a bit mixed deviation. Contracts for Brent crude rose by 0.4%. Gold futures added to the price of 0.2%. Chinese stock index Shanghai Composite lost 0.6%. Nikkei225 declined by 1.6%. Hong Kong’s Hang Seng fell 0.9%.
The external background before bidding in Russia can be characterized as uncertain or mixed. This creates the conditions for a neutral open index Mosberg.
The index Mosberg with a small deviation in the range of 0.1-0.3%, near the 2565 p. as the nearest supports will be the levels of 2560, 2550 p. Significant resistance will be 2580, 2590 p.
After a neutral opening, the index Mosberg with the big share of probability will go into a state of consolidation. This contributes to the mixed external background.
In the second half of the day is the key external reference point for participants in the local trading will remain the dynamics of oil futures. The price of “black gold” can have moved in relation to the formal publication of the weekly statistics on changes in stocks of oil and oil products from the US Department of energy (17.30 GMT).
Vitaly Manzhos,
Senior risk Manager,
IR “Algo Capital”