The same thing
Russian stock exchange ended last week at about 2200 points on the Moscow Stock Exchange index. The downward trend in participants’ trading activity continued. Trading volume in index stocks on Friday was the lowest since early autumn.
The market is still in a flat condition, consolidating with no pronounced dynamics. The decline in turnover itself reduces the activity of intraday traders, which leads to a reduction in the amplitude of fluctuations. This is a temporary phenomenon.
On Friday, the increase in trading volumes was concentrated only on a few securities for which there was corporate news. For example, Yandex shares fell by 5% and took second place in terms of revenue.
According to the Moscow Stock Exchange Index the technical picture does not change in any way. The parameters of the lateral corridor remain relevant: from below, the support area is in the region of 2080–2120 p., From above, the border of the trading range is at 2250 p. It will be possible to speak of a new stable trend only if these boundaries are broken. In the meantime, we reiterate our mostly neutral short-term outlook.
The rise of our market is currently hampered by the decline in commodities, including oil, and the absence of a corresponding weakening of the ruble, which is negative for exporters’ stocks. The medium-term drivers are shifted towards the end of the year: these are the dividends of the major oil companies.
Separation of Yandex – the main theme of the end of last week. The company has announced plans to separate, but details of this process are not yet known. It is possible to distinguish the Russian segment and the international one.
Basically, Yandex’s current valuation is low suggesting growth potential. However, now the key driver of the quotes will not be financial indicators, but how the business will be transformed. In theory, both negative and positive scenarios are possible for minority shareholders. In particular, it is unclear how the Russian management will be redistributed among the shareholders of Yandex NV, whose shares are listed on the Moscow Stock Exchange. If each holder ended up with a part of the new Russian company, which makes up the lion’s share of the proceeds, then this would ensure the removal of the discount for the foreign jurisdiction and would be good.
Until more details emerge, stock volatility could be high. Note that the influence of Yandex quotes on the change in the Moscow Stock Exchange index is very significant. His share is 5.88% – this is the sixth place in the list of heavyweights.
Oil is going down. Brent futures prices dropped below $82 a barrel this morning. The weak dynamics is mainly due to three factors:
• Longer term is a slowdown in global economic growth against a backdrop of tightening DCP extension major central banks in the world.
• In the medium term — decrease due to the expectations of a high level of oil prices from the Russian Federation by the G7 countries and the EU. Earlier, lower levels than the $65-70 discussed in the media were expected, so traders included a more significant reduction in exports from the Russian Federation in the quotes.
• Short-term: The COVID-19 outbreaks in China and the many lockdowns are contributing to a decline in local demand, including for commodities.
Of the next major events, we are waiting for the final decision on the price cap. Examination of this issue will resume today. Russia, in turn, is preparing to legally ban the sale of oil to countries that have introduced a maximum price for it, writes Bloomberg.
From a technical point of view, the current picture for Brent still looks weak. Due to the drawdown in recent sessions, the closest support area has now moved to the $76.2-$79.2 range. From a stronger downturn, the meeting scheduled for December 4 will “hold the brakes” OPEC+. Brent’s potential drop below $80 may not suit cartel countries, so new decisions to cut production are acceptable.
On the foreign exchange market the situation does not change. USD/RUB remains in a tight trading range. In the last 11 sessions, all fluctuations are within the range of 60-61.2. Today there are no signs of exit from the consolidation.
documents in focus
• OR Group (+40%). As noted TAXOn November 24, a representative of the S-tep shoe factory (part of the Or Group group of companies) said during the first court hearing that S-tep was negotiating to conclude an amicable settlement with a key creditor and thus avoid bankruptcy. The authorities of the region plan to restart production at the shoe factory due to the growing demand for special footwear, especially for the needs of the Northern Military District. The factory’s bankruptcy hearing was postponed to Dec. 23 due to creditors’ appeals filed to correct an error in the plaintiff’s filing deadlines.
• VEON (+9.5%). Shares continued to rise on news of the divestment of management of the entire stake in VimpelCom. VEON will receive RUR 130 billion, likely as part of the transfer of debt obligations to VimpelCom. For VEON, the terms of the deal are positive and are fundamentally undervalued. However, after the recent rally, investors may show little interest due to the registration of the holding company in the Netherlands and uncertainty over potential dividend receipts.
• Rosseti center and Volga region (+6.8%). The Board of Directors has recommended an interim dividend of 9M. 2022 in the amount of 0.03015 rubles. That’s about 14% at current prices. The cut will be in early January. Until then, the dividend factor should support the company’s stock.
• Enel Russia (+5.9%). Following the results of the shareholders’ meeting, the company changed its name to PJSC EL5-Energo. This is one of the stages of transformation after the last exit from the shareholding structure of the Italian Enel. Its stake was previously sold to LUKOIL and the Gazprombank-Freesia investment fund.
• Lenzoloto-ao (-21.9%). Shares fell on the back of a dividend gap. The withdrawal turned out to be slightly more than the amount of payments. We do not see any ideas for the growth of the quotations. The buying sprees may be purely speculative, but otherwise we expect stocks to be mostly downward dynamics going forward. The lack of fundamental drivers for the growth of this issuer has already been written several times.
Important events
• RusHydro will release its Q3 2022 IFRS results today
• The results of board meetings on dividends of some subsidiaries have not been published so far Rosseti: Center, Leninergo, Moscow Region. I look forward to receiving your payment information as soon as possible.
External background
Today, Asian markets are mostly trading in negative territory. Futures for the S&P 500 index are down 0.6%, Brent oil is up 2.2% and is close to $81.7.
Quotes
Stock indices
ind. Moscow Stock Exchange (IMOEX2) 2195.53 (-0.70%)
RTS 1141.07 (-0.45%)
S&P 500 4026.12 (-0.03%)
Currency
USD/RUB 60.50 (-0.28%)
EUR/RUB 62.92 (-0.44%)
CNY/RUB 8.41 (-0.40%)
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