The Russian stock market: Fitch will support investors at the opening of trading

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The index Mosberg with a slight increase of about 0.1-0.3%, near the mark 2685 p. as the nearest supports will be the levels 2670, 2660 p. Significant resistance will remain the mark of 2700, 2710 p.
In the first minutes of trading the local stock market can play Friday’s evening news about the increase of long-term ratings of Issuer default of Russia by rating Agency Fitch. Later, he with the big share of probability will go into a state of consolidation in the positive territory.
The exit of important foreign statistics figures today are not planned. Therefore, in the second half of the day the key external reference point for participants in the local trading will remain the dynamics of oil futures.
Last Friday, the main Russian stock indices Mosberg (-0.63%) and RTS (is 1.10%) ended with an irregular decrease in relation to the levels of the previous closing. Despite the mixed external background, on the local stock market, the prevailing negative sentiment. Meanwhile, futures for Brent crude is significantly increased within the day. And yet they were not even able to approach to the nearest significant price level of $60 per barrel. Recovery above this level would mean scrapping the negative medium-term trend in oil contracts. It is possible that we will see the realization of such a scenario in the coming days.
We will add that a major negative factor for foreign stock markets still fears further escalation of the trade war between the US and China. On Friday, the President trump in his usual manner made another ambiguous statement on the matter. He told reporters that the trade negotiations are going well, but the next round of negotiations scheduled for September, may not take place. Thus, optimistic expectations can once again be supported by real facts.
Returning to the dynamics of indexes of RTS and Mosberg, it is worth noting that as a result of Friday’s fall in the medium-term technical picture in them has not changed. Now it can be interpreted as neutral. However, the drawdown of these indices close below the weekly support (2650 p. and p. 1275) formed would signal further medium term fall.
After closing the main session on Friday it became known that rating Agency Fitch Ratings has upgraded long-term Issuer default rating of Russia in national and foreign currency to “BBB” from “BBB-“. This event could support a local stock market during the first half of the day.
At the close of Friday’s evening trading session September futures on the RTS index (RIU9) came to the contango in the value of 9 points, or about 0.7% relative to the reference indicator. Futures market participants improved the rating of the medium-term prospects of the RTS index.
On the noticeable decline of the index Mosberg held at the end of the day, the most liquid stocks ended mostly lower in the range of 1-3% relative to the levels of the previous close.
The most notable event of the day was a substantial drop in the value of interconnected securities plc RUSAL (RUAL RM, -6.02%) and ENPL-GDR (ENPL RM, -2.47%). They opened with a significant gap down in the background publications, in General, weak statements of the aluminum company for the 1st half and 2nd quarter according to IFRS. Its semi-annual net profit decreased by 41.4%. Moreover, adjusted net income for 1H was negative.
The loss of $98 million for the Current deterioration in these financial indicators is connected with the decline of aluminum prices on the London metal exchange (LME) 17.3% YTD. In addition, RUSAL is concerned that the demand for aluminium in the second half of the year could be harmed by the ongoing trade war between the US and China, combined with the global downturn in industrial activity.
The shares of NOVATEK (NVTK RM, -2.23%) is much cheaper, despite the message that controlled by the Issuer, the joint venture Yamal LNG made a profit in the amount of 135.6 billion roubles under IFRS for the first half of 2019. A year earlier, its loss was $ 73.1 billion. Despite significant one-day drawdown medium-term technical picture in these securities continues to remain neutral. They are held within the boundaries of the eleven-week range of 1270-1350 RUB.
Significantly better than the market traded shares of gold mining companies Polyus (PLZL RM, +1.63%) and Polymetal (POLY RM, +0.75%). They are supported by substantial medium-term growth in the value of the yellow metal. From the end of may futures for gold have increased in price about 17%. Now they stabilized near the psychologically significant price level of $1,500 per Troy ounce.
This morning the futures on US stock indices show a moderate increase in cost in the range of 0.1-0.3%. Contracts for Brent oil fell by 0.5%. Gold futures on the brink of positive and negative changes. Chinese stock index Shanghai Composite rose 0.7%. The stock market in Japan is closed today.
The external background before bidding in Russia can confidently be described as uncertain or mixed. And yet Friday raised its long-term ratings of Issuer default of Russia by rating Agency Fitch creates conditions for the opening of index Mosberg with moderate growth.
Vitaly Manzhos,
Senior risk Manager,
IR “Algo Capital”