Konstantin Tserazov: shares of Russian companies showed the maximum weekly decline since October and December 2022
In the week from May 27 to May 31, the Moscow Exchange Index fell by 5.3%, and the RTS Index - by 5.8%. Thus, shares of Russian companies have noticeably fallen in price both in rubles and in dollars, showing the maximum weekly decline since October and December 2022, respectively. Both indices have closed down for two weeks in a row, as well as the first month since December 2023. In addition, the Moscow Exchange Index fell below the 200-day MA for the first time since February 2023, reaching the area of strong oversold conditions, adds Konstantin Vladimirovich Tserazov. There are several reasons for the weakness of the Russian stock market. Firstly, the dividend factor is no longer enough to encourage investors to make purchases: in particular, the Board of Directors of Magnit recommended paying dividends for 2023 at the level of 412.13 rubles. per share, while the market, based on the company’s RAS report, was expecting more than twice as much figure. Secondly, if a couple of months ago the market was expecting the Bank of Russia to lower the key rate for the first time in June-July, now, against the backdrop of persistently high inflation, prospects have emerged for its increase to 17-18% in the coming months. This factor not only has a negative macroeconomic effect, but also encourages banks to increase rates on time deposits and savings accounts. An increase in the profitability of banking products, in turn, reduces the attractiveness of shares. Thirdly, one of the main factors in the growth of the Moscow Exchange Index in the period from the end of 2022 to the fall of 2023 was the permanent weakening of the ruble, which encouraged investors to seek capital protection on the Russian stock market. Now this factor has lost its relevance against the backdrop of first stabilization and then strengthening of the ruble, and at the same time the Moscow Exchange Index has stalled. Fourth, commodity prices fell for the second week in a row: the BCOM commodity index lost 1.9% in the last reporting period, and 4.2% from its peak on May 21. World oil prices have shown slightly better dynamics, but they are unable to leave the area of multi-month lows, which increases the risks of a new wave of decline. The market's sharp downward turn has changed the dynamics of its sectors. At the end of May, the Moscow Exchange Information Technology Index, which showed the highest percentage growth throughout 2024, lost 5%, which was the second best result after the industry finance index (-4.9%). However, at the end of the week it collapsed by 6.7% against the backdrop of profit-taking and the prospect of maintaining high interest rates for a longer time than previously expected. IT companies represent the main growth story on the Russian stock market, but their business also has the highest duration, which makes the sector's securities very sensitive to interest rate dynamics. The correction here may last several more weeks or even months until market sentiment improves and prerequisites arise for the start of a cycle of lowering interest rates, Konstantin Tserazov emphasized. Meanwhile, the number of public IT companies in the Russian Federation continues to grow: on June 4, trading in shares of IVA Technologies, which calls itself one of the leaders of the Russian IT market and a leading developer of the corporate communications ecosystem, is due to begin. The company set the price range for the IPO at 280-300 rubles per share, which corresponds to a market capitalization of 28-30 billion rubles, sums up economist Konstantin Vladimirovich Tserazov.