The Russian stock market needs support

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Last Thursday, the main Russian stock indices Mosberg (-0.43%) and RTS (-0.76%) ended with a moderate decline relative to the levels of the previous closing. They opened neutral. But in the second half of the day on the local stock market is still the prevailing pessimism. Apparently, this was due to negative dynamics of oil prices. His negative role was played by technical factors. After yesterday’s update of the medium-term lows in the indices Mosberg and RTS, have generated a negative technical picture.
We will add that yesterday was saturated with important macroeconomic statistics from the USA. As expected, this added to the markets volatility, but did not give them clear directions for directional movement. Russia has released statistics that indicated industrial production growth in July 2019, at 2.8%. Since the beginning of year this indicator increased by 2.6%. However, members of the local trades routinely ignored data on the state of the domestic economy. Historically, foreign statistics has a significantly greater impact on the Russian stock market.
This morning the external background has improved markedly. This creates conditions for the formation of more or less massive technical rebound indices Mosberg and RTS from fresh lows.
At the close of formal trading session September futures on the RTS index (RIU9) came to the contango in the value of 5.1 points, or about 0.4% relative to the reference indicator. Futures market participants remain neutral assessment of the medium-term prospects of the RTS index.
Accompanied by a moderate drop index Mosberg held at the end of the day, the most liquid stocks ended with a mixed deviation in the range of 1-3% relative to the levels of the previous close.
Among the blue chips once again significantly weaker than the market were representatives of the financial sector: Sberbank JSC (SBER RM, -1.16%), Sberbank-up (SBERP RM, -1.33%), VTB (VTBR RM, -0.97%). They continue to be under pressure due to the continuing trend of weakening of the ruble.
Paper Mechel JSC (MTLR RM, -2.69%), Mechel-Pref (MTLRP RM, -6.01%) have updated their three-year lows against the publication of quarterly and semi-annual operational and financial results of the Issuer. The most troubling indicator was the drop attributable to shareholders net profit by 88% in the 2 quarter compared with 1 quarter of 2019.
This is mainly due to the revaluation of foreign currency debt “Mechel” in the context of medium-term weakening of the ruble. However, attributable to shareholders semi-annual profit increased by 172% in comparison with the 1st half of 2018. Among the positive moments it is worth noting the increase in coal production in the 2nd quarter by 31% compared to the 1st quarter of 2019. However, sales of coal products have lagged behind increased production.
In the second tier of notable drawdown also singled out paper of the Lenzoloto JSC (LNZL RM, -8.42%), the Lenzoloto-up (LNZLP RM, -9.14%). Earlier we talked about the surge of purchases in these illiquid stocks may be short-lived. Dividend payoffs are very volatile from year to year.
By the way, illiquid shares of another gold mining company still has not responded to strong medium-term rise in the cost of the yellow metal. Paper Seligdar JSC (RM SELG, -0.63%), Seligdar-up (SELGP RM, -2.30%) continue to be in a state of medium-term consolidation. However, the attempt to join to a possible speculative rise in them is quite a risky step.
Paper FIVE-GDR (FIVE RM, +2.56%) played yesterday’s publication of strong quarterly financial statements of the Issuer for the IAS. Net profit of the retailer rose by 55.5% by the end of the 2nd quarter and 59.3% in the 1st half. The revenue of the trading network increased by 14.3% for the quarter and 14.9% in the first six months. It is recognized that in current market conditions, this is a very good result.
This morning the futures on US stock indices show a fairly strong increase in the range of 0.5-0.7%. Contracts for Brent crude rose by 1.3%. Gold futures lost 0.1%. Chinese stock index Shanghai Composite rose 0.7%. Nikkei225 grew by 0.1%.
The external background before bidding in Russia can confidently be described as positive. This creates conditions for the opening of index Mosberg with a noticeable increase.
The index Mosberg with a significant increase of about 0.3-0.5%, in the district 2635-2640 p. as the nearest supports will be the levels 2620, 2610 p. Significant resistance will be 2650, 2660 p.
After a positive opening, the index Mosberg may continue a corrective rise to the nearest meaningful level of 2650 p. This contributes to a clear morning improvement of an external background.
In the afternoon, the main external reference point for participants in the local trading will remain the dynamics of oil prices. Indirect effect on local stock market may also have the publication of a number of statistical indicators in the United States. At 15.30 GMT will be released the July data for the change in the number of housing starts and issued building permits. And at 17.00 GMT will be known to the preliminary August index of consumer confidence from the University of Michigan.
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Vitaly Manzhos,
Senior risk Manager,
IR “Algo Capital”