Lukashenko says he may quit as president
Belarus hits EU with tit-for-tat sanctions
Belarusian police introduce colour-coded torture system for detained protesters
Kremlin publicly condemns Belarusian police brutality in hint of growing frustration with Lukashenko
Russian services PMI rises to 48.2, but remains underwater as recovery continues to slow
Russia to start mass vaccinations on December 7
Azerbaijan’s Aliyev calls on Armenia, Russia, Turkey and Iran to assist in creating Nakhchivan land corridor
FPRI BMB Russia: Sberbank releases a three-year transformation strategy to e-commerce concern
Ukraine’s banking sector continues recovery, but profits still lagging last year
Ukraine’s real wages up over 10% in October but have been stagnant in dollar terms for almost a year
FPRI BMB Ukraine: Public has confused opinions on resolving the Donbas conflict
Western Balkans plus Ukraine subsidised coal with over €900mn in 2018-2019
Estonian parcel robot firm Cleveron eyes €30mn state loan
Estonia’s chief auditor says €1bn in state COVID-19 loans issued haphazardly
Economic sentiment in CEE falls in November as recovery momentum splutters
Estonian animation studio Imepilt to hold IPO
Brighter days ahead: The economic bounce back in 2021
Central, Southeast Europe stock markets jump in anticipation of COVID-free future
VISEGRAD BLOG: An easing of trade tensions but still an uncertain situation for export-oriented Central Europe
Hungary's PM risks isolation as Poland mulls dropping EU budget veto
Poland ready to back down from veto of EU budget
Hungary's ruling party in damage control mode after MEP sex scandal bombshell
Poland’s PMI remains stuck just above the improvement line at 50.8 in November
Czech companies dominate this year’s Deloitte Technology Fast 50 CE
Coronacrisis to get worse before it gets better forecasts wiiw
EU diplomats say no chance of Bulgaria removing veto for Skopje to start EU accession talks
IMF says downside risks to Albanian economy are increasing
EU ministers fail to agree on launch of accession talks with Albania and North Macedonia
Western Balkans commit to green agenda and regional common market at Sofia summit
Bosnia’s opposition ousts nationalist parties in major cities
Bosnia’s main ethnic parties fight to hold onto power in local elections
Southeast Europe’s EU members to get biggest boost from next budget and recovery funds
Bulgaria imposes 3-week lockdown to slow down COVID-19 spread
CEE politicians highlight trade and security ties as they congratulate Biden
Breakaway Transnistria fully under Sheriff’s control as Obnovlenie party sweeps board in parliament election
Moldova’s presidential election is over, now the battle for the parliament begins
Moldova’s foreign policy reset
Russian establishment quick to congratulate Moldova's new president-elect
Rising COVID-19 cases put intense pressure on CEE healthcare systems
MEPs urge European Commission to act against Hungarian media financing in North Macedonia and Slovenia
North Macedonia mulls decriminalising cannabis to boost tourism
Retail surpass pre-crisis peak as Romanians shop instead of holiday
Romania’s stability election
Romanian venture capital firm Catalyst launches new €40mn-50mn fund for TMT
Serbia to tighten restrictions further as coronavirus cases reach new peaks
Slovenian PM Jansa stands alongside Hungary and Poland in EU rule of law row
BEYOND THE BOSPORUS: Turkish number crunchers deliver November inflation surprise of 14%
Erdogan needs to go says analyst assessing Turkey’s economic collapse
Ukraine strikes deal with Turkey to produce killer drones instrumental in Karabakh conflict
In Karabakh deal, as many questions as answers
Protesters flood Yerevan demanding Armenia’s “traitor” PM quit over Nagorno-Karabakh surrender
Who emerge as the real winners from the bloody Nagorno-Karabakh conflict?
Below average 2020 wine production destined for volatile and uncertain global market
Iran calls on Saudis to limit $67bn defence spending to Tehran’s $10bn
Iranian prosecutors pledge to pursue Trump for Soleimani killing even after he leaves White House
No reaction from Kazakh elites as bombshell FT report says Nazarbayev’s son in law siphoned millions from pipeline scheme
UK court freezes $5bn in assets connected to fugitive Kazakh banker Ablyazov
Attack of the Debt Tsunami: global debt soars to a new all-time high
Kyrgyzstan's proposed new constitution provokes widespread revulsion
Kyrgyzstan's China debt: Between crowdfunding and austerity
CFC joins RWC in assessing KAZ Minerals buyout offer as under-valuation
China business briefing: Not happy with Kyrgyzstan
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
Mongolia’s wrestling culture: From the grasslands to the cage
No surprises in Tajikistan as Rahmon retains presidency with 91% of vote
A Tajikistan poised on verge of economic calamity set for vote
Tajikistan revives on-off dispute with Iran
Turkmenistan: The dammed united
Turkmenistan: Everybody yurts, sometimes
Dirty money investigation reviews identified payments worth $1.4bn linked to Turkmenistan
Uzbekistan unveils extensive privatisation programme
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Russian dedicated equity funds saw $30mn of outflows as of October 22 and combined funds an outflow of $40mn, according to EPFR Global, as cited by BCS Global Markets.
The outflows follow $20mn of inflows and $10mn of outflows the previous week respectively, says EPFR.
The dollar-denominated Russia Trading System (RTS) is basically flat and stuck at about 1,150, where it has been after recovering from the crash in March when the double whammy of an oil price collapse and when the coronavirus (COVID-19) pandemic began. The RTS index remains down by 25% this year as of October 22.
The story with the ruble-denominated MOEX Russia Index is similar, but includes an FX element, where the exchange rates have been volatile this year. The MOEX index is down by 8% as of October 22.
However, digging into the details and the sectors are putting in different performances and a few individual names have managed to shrug off the crisis and actually produce healthy returns to investors.
The RTS was flat at about 1,200 for most of the summer but has started to drift down in recent weeks. However, within the index consumer stocks and metals & mining have actually clawed back all their losses and are returning a positive, albeit modest, 6% and 5% respectively, after falling deeply into the red earlier this year. The other sectors are all stuck at about 15%-18% down YTD, but the oil & gas sector is the real problem, with those stocks being heavily punished.
Oil & gas stocks were trading about 30% down YTD for most of the summer, but in the last weeks they have fallen even further and the sector is currently returning a loss of 42% since the start of the year. Given the size of the listed oil & gas companies the effect has been to drag the overall RTS index down, but that drop is almost entirely due to the fall in the oil & gas sector.
Investors are largely remaining on the sidelines until the US presidential elections slated for November are over. A victor by Joe Biden looks increasingly likely and analysts are mixed on what that will mean for Russia. Biden is seen as something of a Russia hawk, but on the other hand at least he is sane, which will return some sort of predictability to forecasting. As both stocks and the ruble are very depressed due to sentiment at the moment, analysts are speculating that once the US elections are over there could be a mini-re-rating of the market as stocks and bond prices take account of the end of the unpredictability that has come with the Trump administration.
“More interest to EM stocks, but still no love for Russia – net neutral still. Russia-dedicated funds reported $31mn outflows driven almost exclusively by active funds. GEM equity funds showed $319mn inflows – the third consecutive week of inflows and the best since mid-August, albeit still very small,” Vyacheslav Smolyaninov, chief strategist and deputy head of research at BSC Global Markets, said in a note.
“If the second wave of the COVID-19 pandemic finds its trough and the US elections go smoothly in the coming weeks, we see a good chance for the Russian market to finish the year on a strong note – flow momentum is still neutral to negative,” Smolyaninov added.
There are early signs that some investors are already positioning themselves for the re-adjustment rally. As bne IntelliNews reported, Russian residential real estate developer Samolet has just priced its IPO on MOEX that starts trading next week and is expected to be a success. As bne IntelliNews also reported, the residential real estate sector has been booming on the back of a highly successful government mortgage subsidy that keeps effective interest rates for would-be homeowners at 6.5%.
Residential real estate stocks have been a popular investment pre-crisis but the lion’s share of investment went into market leader PIK, which became something of a “tourist stock” – investors that wanted exposure to Russian consumers and real estate buy this name, but ignore the others. While the stocks of the three big listed real estate companies – including LSR Group (LSR) and Etalon – have recovered much of the lost ground, those of PIK have done much better and the company is now returning 20% YTD, whereas the other two remain underwater compared to their January 1 prices.
There are other examples of investors quietly buying back into the previous market darlings in anticipation of a Biden victor and a return to business as usual, even if US foreign policy becomes tougher on Russia.
Bonds continue to pull in investors
The interest in Russian bonds remains strong and they are considered one of the most popular fixed income instruments globally thanks to Russia’s rock solid fundamentals and the relatively high coupon rates the bonds pay. Russian bonds have seen 21 consecutive weeks of inflows and while the share of non-residents in the flagship Russian Ministry of Finance ruble-denominated OFZ treasury bills has slipped slightly, the amount on foreign investment into the notes remains well ahead of that at the start of the year.
“Another solid week for EM bond funds. GEM bond funds reported the third consecutive week of solid inflows with another $1bn into the asset class this time. This positive dynamic is already being reflected in better FX standing of EM currencies,” Smolyaninov said. “Russia bond funds also informed of the 21st week of inflows in a row. We read the data as positive for bonds in the short term.”
Russian dedicated bond funds saw $10mn of inflows in the seven days ending on October 22, the 21st straight week of inflows, and combined funds took in $60mn, 14 out of 15 weeks of inflows.
Russia’s Ministry of Finance is intending to double borrowing on the domestic market this and issue over RUB4 trillion ($52.4bn) of OFZ this year to fund the extra spending earmarked for coping with the coronacrisis, before returning to the circa RUB2 trillion it usually issues each year.
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