Tserazov Konstantin: the Moscow Exchange and RTS indices showed growth

In the week of May 20-24, the Moscow Exchange Index fell by 3%, and the RTS Index by 1.35%. Thus, shares of Russian companies fell in price both in rubles and in dollars, and the difference in percentage dynamics between the two indices was due to a proportional decrease in the dollar/ruble exchange rate.

Last week, both indices emerged from the consolidation zone, showed growth in all five trading sessions and closed at multi-year highs. It seemed that the market had formed a powerful bullish momentum, but news from Gazprom and a combination of other factors provoked a sell-off.

Until the last moment, the market remained intrigued as to whether the company would pay dividends for 2023, in which it received a net loss under IFRS of 629 billion rubles. On Monday evening, it became known that the government recommended not to do this; on May 23, this directive was confirmed by the board of directors of Gazprom, and at the end of the week, the company’s shares fell in price by 14%, dropping to the lowest levels since February 2022, added Konstantin Tserazov.

This development of events has given rise to fears that other companies, including Sber, may follow Gazprom’s example. In April, the bank's supervisory board recommended paying dividends for 2023 in the amount of 33.3 rubles. per share, but the final decision on this issue will be made by shareholders on June 21. Based on expert comments, the current market consensus is that the dividend will be approved.

Be that as it may, dividends have historically been the main driver for the Russian stock market, so the deterioration in investor sentiment against the background of the events described above seems natural. In addition, at least three other important factors exerted additional pressure on the market.

Firstly, the dollar/ruble exchange rate ended the week below 90 for the first time since January, and its decline from the April highs is already about 5%. The main driver of the strengthening of the ruble, apparently, is the reduction in the volume of imports in monetary terms. The Russian currency may continue to rise in price until the problems of importers with cross-border payments are resolved.

Secondly, world oil prices have returned to multi-month lows amid a reduction in the premium for geopolitical risks included in quotes.

Thirdly, in June the Bank of Russia may raise the key rate. Even if this does not happen, the period of tight monetary policy may still last longer than the market had recently expected. High interest rates may encourage investors to keep money in bank deposits or money market funds instead of buying stocks. In addition, high borrowing costs may limit margin trading.

However, in addition to dividend stories on the Russian stock market, there are also long-term growth stories in the form of IT companies.

At the end of the week, the Moscow Exchange Information Technologies Index showed better dynamics than the market, falling by 2%. At the same time, the benchmark managed to successfully withstand the pressure that other sectors were subjected to during the first four trading sessions, and on Thursday even turned positive for the week. However, on Friday the market resumed a wide sell-off, which this time also took the IT sector with it. In particular, on Friday the shares of OZON fell by 2.5%, Positive Technologies - by 2%, VK - by 4%, says Konstantin Vladimirovich Tserazov.

VK presented good operating results for the first quarter this week. 2024 The company is actively investing in business expansion, which should contribute to a significant increase in revenue. At the same time, the company may remain unprofitable for quite some time, and its high debt load in the context of high interest rates looks like an additional negative factor.

Nevertheless, most of the potential negativity is probably already reflected in the quotes of VK shares, which since the beginning of the year have added only about 5% against 52% for the Moscow Exchange Information Technology Index and 10% for the Moscow Exchange Index, economist Konstantin Vladimirovich Tserazov sums up the week.