Reuters: experts still positive about Russian stocks in 2020
However, coronavirus-related fears may disrupt the market
Analysts expect Russian equities to show positive dynamics this year notwithstanding the negative background caused by China’s coronavirus epidemic. At the same time, the current market uncertainty is pushing some experts to refrain from long-term forecasts.
The Russian stock market is likely to reach new highs in 2020 despite an uncertain backdrop, says Reuters citing a poll of market experts. Last year, Russia’s ruble-denominated MOEX index was among the best global performers thanks to consistent rate cuts by the Central Bank and increasingly high dividend payments by Russian companies, which made Russian equities attractive to buyers. On 20 January 2020, the index hit a record high of 3,226.9.
However, Reuters’ experts warn that the coronavirus epidemic may harm Russia along with other emerging and developed markets, as it is lessening global appetite for risk. “The coronavirus situation is clearly a wild card — the market currently seems to be pricing in a best-case scenario, whereas the full economic impact may be felt and appreciated only toward mid-March,” said Equity Strategist at Gazprombank Erik DePoy.
Most forecasts in Reuters’ poll were collected in the middle of February. Since then, global markets have suffered from fresh coronavirus concerns with the ruble and Russian stocks falling to 2020 lows last week. The virus-related uncertainty made some analysts refrain from long-term forecasts in the February poll unlike in previous polls. Others still see MOEX recovering and peaking at the end of 2020. According to a consensus forecast of 13 analysts, gains in the dollar-based RTS index are expected to continue into 2021.
The likelihood of a correction in global stocks in 2020 is substantial, but Russia will be impervious to the worst of that decline, considers Equity Analyst at Solid Investment Dmitry Donetsky. “The Russian market, in our opinion, stands apart,” he explained. “Most companies have not yet realised their potential. Therefore, taking into account declining rates, we are prone to moderately positive dynamics of indices.”
Other experts are less positive. According to Chief Economist at Otkrytie Research Maksim Petronevich, elevated uncertainty among investors is likely to remain, while the expectations of strong economic performance in 2020 are evaporating. “We are not ruling out the possibility of a global indices pullback in 2020,” he said. At the same time, the market is drowned with liquidity due to a global trend for rate cuts, and this may limit downside pressure, believes Georgy Vashchenko, the head of Freedom Finance’s trading operation.