The Russian stock market in 2019 updated all-time highs. What caused the “bullish trend” and how long it will last – Konstantin Tserazov, an independent expert, economist, ex-deputy head of global markets at Troika Dialog, commented on the events of the past year in our interview.
At the end of 2019, the Moscow Exchange index added 28.6%, and the RTS index soared by 45% amid the strengthening ruble. The impressive growth of indicators is due to a positive external background, a decrease in geopolitical and sanctions risks, an improvement in the economic situation in Russia, as well as an increase in dividend payments and an increase in commodity prices, the expert noted. According to Otkritie Bank analysts, the ruble capitalization of the Russian market increased from 9.8 trillion rubles to 11.8 trillion rubles, and the ruble strengthened against the dollar by 10.7%.
The Russian market moved in line with the general positive — despite the slowdown in the global economy, the US and European indices also updated their annual highs, says Konstantin Tserazov. The easing of the monetary policy of the Bank of Russia also played its role. At the beginning of the year, inflation reached 5.3%, and then began to decline. Since June, the Central Bank of the Russian Federation began to reduce the rate, lowering it by the end of the year from 7.75% to 6.25%. According to the forecasts of the regulator, in 2020 inflation will reach the target value of 4%. At the same time, even with the rate cut, the yield of Russian securities remained high, which led to the influx of foreign investment into the market, Konstantin Tserazov notes.
An important factor was the growth of oil prices. According to the analysts of FC Otkritie Bank, over the year, a barrel of Brent oil against the background of production cuts by OPEC+ countries has risen in price by almost 27%, from $54 to $68. At the end of the year, all sectors showed positive dynamics, and the largest growth — at the level of 25-30% — was demonstrated by oil and gas companies, telecoms, energy and banks.
The Russian market, despite its impressive performance, is still underestimated and remains more interesting than its global counterparts. Among the prerequisites for growth in 2020, the expert names a favorable external background and the attractiveness of the market due to high dividend yields. If oil prices remain above $60 per barrel and the trade wars between the US and China deescalate, the Moscow Exchange index may show growth at the level of 20-25%, Konstantin Tserazov concludes.