Morning Note /

Alfa Morning Bulletin: 15 January 2021

  • Russian stock rally still on track

  • Markets cautious as Biden’s fiscal stimulus may prove a double-edged sword

  • Russian cyclicals and value stocks may be key beneficiaries from new stimulus

15 January 2021
Published byAlfa

Russian stock rally still on track: After a slow start the Russian market continued to romp higher on Thursday – RTSI (+0.9% @ 1,500) and IMOEX (+1.2% @ 3,217) – with the RTS breaking above 1,500 for the first time in almost a year. Cyclical stocks continued to power the Russian market higher – banks, metals & miners and oil & gas stocks. The ruble rebounded and recovered all of previous session’s weakness plus some (+0.6% @ 73.21) with a slight tailwind from a higher oil price (Brent +0.6% @ 55.42).

Russian cyclicals and value stocks may be key beneficiaries from new stimulus: The Russian market is likely to consolidate this morning after delivering a very strong performance this week, as caution takes hold on global markets after US President-elect Joe Biden proposed a very ambitious $1.9 trillion stimulus plan to jump-start the world’s largest economy and accelerate the response to Covid-19. However, the proposed relief stimulus package may prove a double-edged sword for investors, sustaining optimism for further economic revival while raising worries over borrowing costs. The fiscal program will need to be paid for in the form of sharply higher interest rates or tax hikes and that could cap lofty equity valuations. Rising yields threaten to weigh on tech and growth stocks, but the backdrop appears bullish for cyclicals risk assets, hence the Russian equity market should benefit. We expect metals & mining stocks to be outperformers today.

Key news

Car sales dropped by 2.1% y/y in December 2020 – Mixed