The Russian stock market in an optimistic mood

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Last Thursday, the main Russian stock indices Mosberg (+1.04%) and RTS (+1.15%) ended with strong growth relative to the levels of the previous close. The positive external background promoted it only in part. A significant contribution to yesterday’s increase of the local stock indices made heavy stocks LUKOIL and Gazprom, which increased dramatically in price. However, other liquid securities showed unequal bi-directional deflection.
Among important external signals, it is worth noting yesterday’s improved sentiment in the oil market. Futures on Brent crude has managed to update its three-week high. Now they are trading around $73 per barrel. As we can see, a significant weekly increase in stocks of oil in the USA did not scare the commodity bulls. Geopolitical risks once again outweigh in importance the “dry” statistics.
Meanwhile, the situation in the middle East is becoming increasingly alarming. The Ministry of defense of Saudi Arabia openly accusing Iran of direct involvement in the attack drones on the Saudi oil pipeline. Do not forget about the recent acts of sabotage against several oil tankers in the region. One way or another, but the stability of supplies in the middle East “black gold” is under threat. Meanwhile, from the Persian Gulf is transported by sea only about 20% of the total world sales of oil.
This morning it became known that the United States concentrated at a given point in the world no less than seven warships. A clear demonstration of military force is intended to put additional pressure on Iran. The Islamic Republic, in turn, suspended the execution of a number of obligations under international nuclear deal. In addition, Iran has repeatedly declared its intention to circumvent the oil embargo by the US and complicate transportation of oil through the Strait of Hormuz in response to hostile external actions.
At the close of formal trading session, the June futures on the RTS index (RIM9) came to the state of backwardly value at 31 points, or about 2.5% relative to the reference indicator. The participants of the urgent market has considerably worsened and without that a negative assessment of the medium-term prospects of the RTS index.
Despite the significant growth of the index of Masuri held at the end of the day, the most liquid stocks ended mixed with an irregular deviation in the range of 1-4% compared to the levels of the previous close.
The most notable event on the market was a strong increase in the cost of shares in LUKOIL (LKOH RM, +4.00%). The impetus for this was the message that the Board of Directors of the oil company recommended the shareholders to approve the issue of capital reduction. This procedure will be carried out through the purchase of 35 million shares at 5450 rubles apiece in the framework of the public offer with the subsequent repayment. So, papers “LUKOIL” has got a new medium-term price target, which is 4.8% above the price of yesterday’s closing.
Shares of Gazprom (GAZP RM, +3.62%) continue to react to the news about the forthcoming two-fold increase in the size of annual dividend payments to the level of RUB 16.61 per share. A positive role was played by the publication of the quarterly reports of the Issuer for the company. The company’s net profit in the 1st quarter of 2019 has increased by nearly 63%, to 199.5 billion rubles.
Despite the obvious short-term overbought, shares of “Gazprom” yesterday has managed to exceed the significant price level was 200 RUB. This can be interpreted as a positive technical signal. However, this fact does not negate the probability of sufficient magnitude corrective decline of these securities from the achieved level.
Paper LSR (LSRG RM, +4.84%) used the raised demand against the publication of recent decisions of the Board of Directors of the Issuer. He recommended that the shareholders approve the payment of annual dividends of RUB 78 per share, or approximately 11.4% of the price of yesterday’s closing.
It is also worth noting the weakness of yesterday’s papers Inter (IRAO RM, -2.13%). They increased significantly in price since the beginning of the week. The reason for this was the news about the upcoming increase in their weight in the composition of the MSCI Russia index. Yesterday’s publication of strong quarterly reports of the company Inter IFRS was the occasion for the beginning of profit taking in it shares.
This morning the futures on US stock indices show a marked drop in the value of in the range of 0.3-0.4%. Contracts for Brent crude rose by 0.1%. Gold futures have increased in price 0.1%. Chinese stock index Shanghai Composite has decreased on 1.8%. Nikkei225 rose by 1.0%.
The external background before bidding in Russia can be characterized as uncertain or mixed. This creates conditions for the opening of index Mosberg with minor deviation.
• The index Mosberg with minor deviation within 0.3%, near 2580 p. as the nearest supports will be the levels 2570, 2560 p. Significant resistance is seen around 2590, 2600 p.
• After the neutral start of trading the index Mosberg can go into a state of consolidation. This contributes to the ambiguous external background. So Russian stocks in their bulk do not have incentives to large-scale deviations. However, we should not exclude significant movement in individual blue chips.
• In the afternoon, the main external reference point for participants of the Russian auction will remain the dynamics of oil futures. Indirect effect on local stock market may also have formal publication of the preliminary assessment of the may index of consumer confidence in the United States from the University of Michigan (17.00 GMT).
Vitaly Manzhos,
Senior risk Manager,
IR “Algo Capital”