The main thing
Russian stock market ended last week at about 2200 points on the Moscow Exchange index. The downward trend in trading activity of participants continued. The trading volume in the shares of the index on Friday was the lowest since the beginning of autumn.
The market is still in a flat condition, consolidating without any pronounced dynamics. The decline in turnover itself reduces the activity of intraday traders, which leads to a drop in the amplitude of fluctuations. This is a temporary phenomenon.
On Friday, increased trading volumes were concentrated only in some stocks for which there was corporate news. For example, Yandex securities fell by 5% and took second place in terms of turnover.
According to the Moscow 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 located in the region of 2080–2120 p., From above, the border of the trading range is at 2250 p. It will be possible to talk about a new stable trend only if these boundaries are broken. In the meantime, we reiterate our predominantly neutral short-term outlook.
The rise of our market at the moment is hampered by the fall in commodities, including oil, and the absence of a corresponding weakening of the ruble, which is negative for the securities of exporters. Medium-term drivers are shifted towards the end of the year – these are the dividends of the largest oil companies.
Separation of Yandex – the main theme of the end of last week. The company announced plans for separation, but the details of this process are not yet known. It is possible to single out the Russian segment and the international one.
Fundamentally, Yandex’s current valuation is low and suggests growth potential. However, now the key driver of quotes will not be financial indicators, but the way the business will be transformed. In theory, both negative and positive scenarios for minority shareholders are possible. In particular, it is not clear how the Russian direction will be redistributed among the shareholders of Yandex NV, whose shares are traded on the Moscow Exchange. If each holder ends up with a part of the new Russian company, which accounts for the lion’s share of the proceeds, then this would ensure the removal of the discount for foreign jurisdiction and would be positive.
Until more details emerge, volatility in stocks could be elevated. Note that the influence of Yandex quotes on the change in the Moscow Exchange index is very significant. His share is 5.88% – this is the sixth place in the list of heavyweights.
Oil is getting lower. Quotes of Brent futures are falling below $82 per barrel this morning. Weak dynamics is primarily due to three factors:
• Long-term is a slowdown in global economic growth amid tightening DCP key world central banks.
• Medium-term — decrease due to expectations of a high level of ceiling for oil prices from the Russian Federation by the G7 countries and the EU. Earlier, lower levels were expected than the $65-70 discussed in the media, so traders included in quotes a more significant reduction in exports from the Russian Federation.
• Short-term – COVID-19 outbreaks in China and multiple lockdowns contribute to a local drop in demand, including for commodities.
Of the upcoming important events, we are waiting for the final decision on the price ceiling. Consideration of this issue will resume today. Russia, in turn, is preparing to legally ban the sale of oil to countries that have introduced a price ceiling for it, writes Bloomberg.
From a technical point of view, the current picture for Brent still looks weak. Due to the drawdown of recent sessions, the nearest support area has now shifted to the range of $76.2–79.2. From a stronger fall, the meeting scheduled for December 4 will “hold back” OPEC+. The potential fall of Brent below $80 may not suit the countries of the cartel, so new decisions to reduce production are acceptable.
On the foreign exchange market the situation does not change. The USD/RUB pair remains in a narrow trading range. In the last 11 sessions, all fluctuations fit into the range of 60-61.2. There are no signs of exit from the consolidation today.
papers in focus
• OR Group (+40%). As noted TASS, On 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 agreement with a key creditor and thus avoid bankruptcy. The authorities of the region expect to restart production at the shoe factory due to the growing demand for special-purpose footwear, in particular for the needs of the Northern Military District. The factory’s bankruptcy hearing was postponed until December 23 due to creditors’ appeals filed to correct an error in the filing deadline by the plaintiff.
• VEON (+9,5%). Shares continued to rise on the news about the sale of the management of the entire stake in Vimpelcom. VEON will receive 130 bn RUR, probably as part of the transfer of debt obligations to Vimpelcom. For VEON, the terms of the deal are positive, and they are fundamentally undervalued. However, after the recent surge, investors may show muted interest due to the registration of the holding company in the Netherlands and the uncertainty about the potential receipt of dividends.
• Rosseti Center and Volga Region (+6.8%). The Board of Directors recommended an interim dividend for 9M. 2022 in the amount of 0.03015 rubles. This is about 14% at current prices. The cutoff will be at the beginning of January. Until then, the dividend factor should support the company’s quotes.
• Enel Russia (+5.9%). Following the results of the meeting of shareholders, the company changed its name to PJSC EL5-Energo. This is one of the stages of transformation after the last exit from the shareholders of the Italian Enel. Its share 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 drawdown turned out to be slightly larger than the amount of payments. We do not see any idea for the growth of quotes. Bursts of purchases can be exclusively speculative, but otherwise we expect predominantly downward dynamics of securities in the future. The lack of fundamental drivers for the growth of this issuer has already been written many times.
Important events
• RusHydro to publish 3Q 2022 IFRS results today
• So far, the results of meetings of boards of directors on dividends of a number of subsidiaries have not been published Rosseti: Center, Lenenergo, Moscow Region. Looking forward to receiving payment information as soon as possible.
External background
Asian markets are trading mostly in negative territory today. Futures for the S&P 500 index are down 0.6%, Brent oil is up 2.2% and is near $81.7.
Quotes
Stock Indices
Ind. Moscow 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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