Tuesday, 31 March 2015 20:16
MOSCOW: Russian shares will rise another 14 percent by the end of 2015 as a stronger rouble and a modest uptick in oil prices helps them build on gains made in the first three months of the year, a Reuters poll found.
Moscow-listed assets took a heavy hit late last year when panic gripped Russian financial markets and the rouble tanked, in part due to collapsing oil prices and Western sanctions imposed over the Ukraine conflict.
Investors have since cautiously returned to the market, with Russia-focused funds registering slight inflows year-to-date, as oil prices have moved away from multi-year lows and the rouble has strengthened. Many in the market assume the near-term threat of more Western sanctions on Russia has receded.
The dollar-denominated RTS share index, which closed at 878.94 points on Monday, is up 11 percent so far in 2015.
The median forecast from 11 analysts, polled in the past week, showed the RTS would end the year at 1,000 points.
Forecasts ranged from 630 to 1,200 points, reflecting uncertainty as to how markets will react in the nine months ahead given heightened volatility in Russian assets in the past year.
“Equities are still struggling for attention versus the bond market. But the tension that we saw late last year has receded,” said Erik DePoy, an equities strategist at Gazprombank.
“The market is very elastic in that respect, it has tremendous rebounds. In this market, if you don’t have good nerves then you probably shouldn’t be here in the first place.”
The RTS hit a five-and-a-half year low in mid-December, but many analysts cite rock-bottom valuations as a factor drawing risk-tolerant buyers to the market. The RTS last reached 1,000 points in late November.
Vladimir Miklashevsky, a trading desk strategist at Danske Bank, said the RTS would reach 1,000 points as its main contributors, large exporters, were benefiting from the weaker rouble despite lower oil prices.
“We also like low-cost retailers such as Magnit as Russian consumers are pushed away from premium stores by falling purchasing power and rouble depreciation,” he said.
Analysts say gains in Russian stock indexes will be capped by the gloomy outlook for the economy.
The latest data supports expectations the Russian economy will see a sharp contraction in 2015, with retail sales and real wages slumping in February.
Concerns over the economic slowdown were a key driver for share price falls in 2014, particularly for domestic-focused stocks. The RTS fell around 45 percent in 2014.
Copyright Reuters, 2015
