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Weekly Radar – With summer upon us attention moves to dividends

  • Russia moves higher as geopolitical risk eases
  • Positive backdrop for Russian equities
  • Pragmatism eases geopolitical risk

Positive backdrop for Russian equities: There is a sense of optimism surrounding the Russian investment case, the economy is recovering, oil is trading high enough to return the budget to surplus and geopolitical threats have been easing. That optimism provides a positive backdrop for Russian equities with dividends season approaching its peak. That optimism was underscored by the solid inflow of $64 mn to Russia funds last week, according to EPFR data. Despite a sluggish start to the week we expect Russian equities to continue their ascent in a broad-based advance. The reflation trade remains in play and commodity prices remain high regardless of the correction. After the PMI surveys in Europe and the US last Friday showed spectacular growth, all focus will be on US personal consumption and inflation figures this week. If inflation shows signs of easing it would provide support for growth and tech stocks. A stronger ruble is positive for domestic names in the utilities and retail sectors as well as real estate names.

Positive backdrop for Russian equities: There is a sense of optimism surrounding the Russian investment case, the economy is recovering, oil is trading high enough to return the budget to surplus and geopolitical threats have been easing. That optimism provides a positive backdrop for Russian equities with dividends season approaching its peak. That optimism was underscored by the solid inflow of $64 mn to Russia funds last week, according to EPFR data. Despite a sluggish start to the week we expect Russian equities to continue their ascent in a broad-based advance. The reflation trade remains in play and commodity prices remain high regardless of the correction. After the PMI surveys in Europe and the US last Friday showed spectacular growth, all focus will be on US personal consumption and inflation figures this week. If inflation shows signs of easing it would provide support for growth and tech stocks. A stronger ruble is positive for domestic names in the utilities and retail sectors as well as real estate names.

Pragmatism eases geopolitical risk: Recent weeks have been characterised by a marked dial-down in geopolitical tensions between Moscow and Washington with US President Biden opting for pragmatism to prevent a deterioration of relations between Russia and the US. Last week’s meeting between Russian Foreign Minister Lavrov and US Foreign Secretary Blinken was constructive with both parties eager to engage in further dialogue. There was further progress on the geopolitical front for Russia last week after the Biden Administration waived sanctions on Nord Stream-2. This sets a positive backdrop ahead of the scheduled meeting between President Putin and Biden in Switzerland in June. That said, the US government is obliged to bring additional sanctions against Russia under the terms of the CBW legislation: these may again be “mild” or the President could revert to the tougher options he previously referred to. But much will likely depend on whether there is a summit between Biden and Putin (likely on 15 or 16 June and how successful that is deemed to be.

Other topics covered:

  • April macro stats, GDP and banking data in focus on Russia’s economic calendar

  • Commodity prices correct

  • We stay conservative on oil prices amid Iranian talks

  • Corporate earnings include HHR and PLZL


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The contents of this document have been prepared by Joint Stock Company “Alfa-Bank” ("Alfa Bank") as Investment Research within the meaning of Article 36 of Commission Delegated Regulation (EU) 2017/5...

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