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Russian stocks to recover after COVID-19 in 2020, hit record highs in 2021 - Reuters poll

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05/28/2020 | 04:24am EDT

By Andrey Ostroukh

Russia's stock market is forecast to continue recovering in 2020 after a double-hit from a drop in oil prices and the novel coronavirus, reaching fresh record highs in 2021, a Reuters poll of market experts showed.

Russia's rouble-denominated MOEX index was among the best global performers in 2019 amid high dividend payments by Russian companies and hit an all-time high of 3,226.9 in January before a rapid slump in March.

While the eventual fallout from the coronavirus pandemic and related lockdowns is yet to be assessed, stocks are poised to shrug off the shock more quickly than the Russian economy, which is on track to contract 5% this year.

The worst for Russian stocks is over, showed a forecast of 12 analysts polled in the second half of May.

The MOEX rouble-denominated index is seen recovering to 2,900 by the end of this year, up 5.3% from 2,754 on May 26. Year-end forecasts ranged from 2,430 to 3,050.

"The world now is much more adapted to the idea of the virus itself, which should limit potential sales bearing in mind that central banks and governments are actively supporting their economies, the summer is on the way and even if the second virus waves occur everyone should be more prepared to handle them," said Elena Kozhukhova from Veles Capital brokerage.

The Russian central bank slashed its key rate to 5.5% in April and promised more cuts later this year, eroding the attractiveness of bank deposits.

"Capital migration from bank deposits to stocks may become higher amid low interest rates and tax on interest earned on deposits. Many companies still pay dividends and offer better yields than banks," Finam brokerage said.

Russian authorities are planning to impose taxes on returns from bank deposits, which could further turn investors away from deposits to stocks.

By the middle of 2021, the MOEX is seen reaching 3,100 before hitting a record high of 3,350 by end-2021.

Even though the forecast remained optimistic, analysts pointed to downside risks such as a second wave of the COVID-19 pandemic and related bankruptcies.

The dollar-based RTS index is forecast to trade at 1,325 points by the end of this year, up 8.2% from around 1,225 on May 26. Forecasts in the poll ranged from 1,050 to 1,500.

The RTS is seen climbing further to 1,450 by mid-2021 and to 1,600 by the end of the next year.

"Russian equities maintain their attractiveness versus EMs based on valuation metrics and dividend yields, while sensitivity to COVID-related risks is limited," said Erik DePoy, equity strategist at Gazprombank.

(Reporting by Andrey Ostroukh; additional polling by Mumal Rathore, Khushboo Mittal and Sumanto Mondal in Bengaluru; Editing by Steve Orlofsky)

Stocks mentioned in the article
ChangeLast1st jan.
AMP LIMITED 1.96% 1.56 End-of-day quote.-18.54%
BEST INC. -2.48% 4.32 Delayed Quote.-20.32%
EURO / US DOLLAR (EUR/USD) 0.22% 1.18408 Delayed Quote.5.19%
LONDON BRENT OIL -0.53% 44.93 Delayed Quote.-31.35%
THE GLOBAL LTD. 0.00% 205 End-of-day quote.-56.48%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.07% 72.755 Delayed Quote.19.08%
WORLD CO., LTD. 0.06% 1572 End-of-day quote.-41.58%
WTI -0.52% 42.2 Delayed Quote.-30.68%
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