The fall of the Russian stock market is gaining momentum

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Last Thursday, the main Russian stock indices Mosberg (-1.17%) and RTS (-1.29%) ended with a strong decrease towards the levels of the previous closing. Negative dynamics was significantly associated with a clear deterioration of external background. However, from a technical point of view, the local equity market has long been in a state of medium-term overbought. Yesterday’s corrective decline is objectively overdue since the end of January. The Russian trading just expected a more or less clear signal for the beginning of active profit fixation on long positions.
It should be noted that the indices of Mosuri and RTS has not yet exhausted the potential for further decline of the one-day drawdown. This morning, their decline may continue. This contributes to a significant deterioration of sentiment in the oil market yesterday evening.
At the close of formal trading session, the March futures on the RTS index (RIH9) came in as a minor backwardly value of 1.6 points, or about 0.15% relative to the reference indicator. Futures market participants remain neutral assessment of the medium-term prospects of the RTS index.
Against the background of fairly strong subsidence of the index Mosberg held at the end of the trading day, the most liquid stocks ended mostly lower in the range of 1-3% relative to the levels of the previous close.
The leaders of the fall among the blue chips made paper Sberbank JSC (SBER RM, -2.58%), Sberbank-up (SBERP RM, -2.24%). The shares have pretty much retreated from its recent medium term highs despite the release of generally positive financial results of the Issuer for the January 2019 at the RAS. Monthly net profit of “Sberbank” has increased by 12.7% compared to the same period last year.
Among other positive facts, it is worth noting the increase in the Bank’s share in the market of attraction of funds of legal entities to 23.1% compared to 20.9% a year earlier. From a technical point of view, the situation in heavy weight papers of “Sberbank” is similar to the pattern prevailing in the ruble MICEX index. They began to “unload” accumulated since the beginning of the year overbought.
Shares of Gazprom (GAZP RM, -1.73%) significantly outperformed the market in the fall amid reports of new “attacks” on gas pipeline project “Nord stream-2” with the United States. Yesterday it became known that the ambassadors of the United States in Denmark and Germany, as well as the U.S. permanent representative to the EU, calling for amendments to the Gas Directive of the EU. Proposed amendments could impede the implementation of this pipeline project.
The shares of Rosneft (ROSN RM, -2.37%) continued corrective pullback after the recent four percent increase associated with the publication of the positive annual financial and operating results of the Issuer. As a serious medium-term risk for Russian oil companies is the aggravation of the political uncertainty in Venezuela.
This calls into question the likelihood of a return of major investments of “Rosneft” in this country. Let’s not forget that about 10 years ago the oil sector of Venezuela were nationalized. The potential change of the top leadership and the political course it may well lead to a new redistribution of property.
Noticeably weaker market also closed paper RUSAL plc (RUAL RM, -3.35%), ENPL-GDR (ENPL RM, -2.04%), AFK Sistema (AFKS RM, -2.63%), clA Yandex (YNDX RM, -2.31%), TMK (TRMK RM, -2.85%), Enel Russia (ENRU RM, -2.76%).
Shares of NLMK (NLMK RM, -0.89%) managed to close slightly better market against the publication of controversial the Issuer’s financial statements under IFRS for Q4 and for the entire 2018. Its net profit in US dollars increased by 54% for the year and 19% in 4Q. But in comparison with the 3rd quarter, it decreased by 21%. A similar situation exists with the dynamics of revenue of NLMK.
It is also notable intraday gains of the shares of “Magnet” (RM MGNТ, +0.10%), which took place against a falling market. Investors and speculators appreciated the fact that the retail chain has managed to increase quarterly comparable sales for the first time in 2 years. Its net profit in rubles according to IFRS increased by 7.1% in 4Q 2018. However, the annual net profit of “Magnet” fell by 4.9%.
Before you start trading in Russia the futures for US stock indices showed a significant drop in the value of an average of about 0.5%. Contracts for Brent crude fell by 0.6%. Gold futures lost 0.1%. Japanese stock index Nikkei225 declined by 1.9%. Hong Kong’s Hang Seng fell 0.3%.
The external background before bidding in Russia can confidently be described as negative. This creates conditions for the opening of index Mosberg with a noticeable decrease.
• The index Mosberg with a noticeable decrease of about 0.4-0.5%, near the 2500 p. as supports will be the levels 2490, 2480 p. Immediate resistance is seen around 2510, 2520 p.
• In the first minutes of trading, the index Mosuri will win back morning deterioration of an external background. Later he can go into a state of consolidation around the nearest “round” level of 2500 p. waiting for new important signals for directional movement. An additional incentive for temporary stabilization of the market will be awaiting the decision of the CBR’s key rate (13.30 GMT).
• Output relevant to the local market to foreign statistics today is not scheduled. Therefore, in the second half of the day, members of the local trades will be used to focus on the dynamics of oil prices.
Vitaly Manzhos,
senior risk Manager,
IR “Algo Capital”