Analysts named the most profitable investments in 2023 | December 29, 2023

Source: RIA News”

Even in the context of a weakening ruble, the greatest income for investors at the end of 2023 could be brought by investments in Russian shares, follows from the comments of analysts interviewed by RBC.

The best dynamics were shown by securities of the financial sector, although until 2022 the market favorites were exporters.

Against the backdrop of rising rates, long bonds with a fixed coupon were not the most successful investment. At the same time, floaters (bonds with a variable coupon linked to the key rate or RUONIA) showed good profitability. Substitute bonds denominated in foreign currency also remain attractive; in addition to coupon income, they can also make money on the weakening of the ruble.

Risk-free instruments – ruble deposits and money market funds did not bring significant income, but made it possible to compensate for or slightly outpace inflation.

Russian shares

From the beginning of the year until December 28, the Moscow Exchange ruble index (as of the end of December it included the 50 most liquid Russian stocks) grew by 43.8% and reached 3101.99 points. The RTS dollar index has added about 12.5% ​​since January and rose to 1090.93 points.

Source: RIA News”

The Moscow Exchange total return index, which takes into account dividend payments, has risen by 53% since the beginning of the year, notes Albert Koroev, head of the stock market experts department at BCS World of Investments. “Significant growth among liquid securities was shown by Sberbank (+88%), “Tatneft” (+90%), “Mechel“(+173%),” the expert lists. Koroev assesses the result of the Russian market as good: “Although it was achieved from a low base after a decline in 2022.”

In 2022, after the start of Russia’s special military operation in Ukraine, the Russian stock market experienced the largest collapse in its history – the Moscow Exchange index lost 33.28% in one day, after which trading in shares on the site was suspended for a month and a half.

Returns similar to those shown by the Russian market in 2023 are rare, adds Artem Outlev, an analyst at Ingosstrakh-Investments Management Company. He highlights shares of the financial sector, which by the end of 2022 “will earn a record amount of profit.” Among his favorites, Outlev names the shares of Moscow Exchange (since the beginning of the year, prices have more than doubled), which is the beneficiary of high rates, since it makes money by placing clients’ cash balances, as well as shares of Sberbank, which, in addition to the growth of quotes, pleased shareholders with record dividends.

The index of small and medium capitalization companies – MCXSM – showed returns higher than the Moscow Exchange index, adds Vadim Senkevich, head of the analytical department of RSHB Asset Management. Since the beginning of the year, it has grown by 62.5%, according to data from the site.

This index includes 42 Russian shares, for example, shares of Aeroflot, CIAN, AFK Sistema and others.

Investments in foreign securities

On January 1, 2023, the Bank of Russia’s ban on the purchase by unqualified investors of foreign securities of issuers from unfriendly countries came into effect. In addition, in November, the St. Petersburg Exchange, which specializes in trading foreign assets, came under US sanctions. The introduction of restrictions led to the blocking of investor assets totaling about $3 billion. Therefore, it is difficult to summarize the financial results for these assets.

Those investors who invested in the foreign market directly (through foreign or some Russian brokers) received different results. “Among key economies, American securities gave the best returns (S&P 500 – +24%, NASDAQ – +43%), Chinese stocks disappointed – the mainland CSI 300 index and the Hong Kong Hang Seng index fell by 16-17% in dollars,” notes the head Finam stock analysis department Natalya Malykh.

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Bonds of Russian issuers

In July 2023, the Central Bank moved to tighten monetary policy and raised the key rate from 7.5 to 16% per annum in five rounds. This became a negative factor for previously issued bonds with a fixed coupon income, and they fell in price. At the same time, new bond issues, already placed at double-digit rates, could become a profitable investment for investors, given that the head of the Central Bank, Elvira Nabiullina, announced in December that the rate hike cycle was approaching completion.

Among government bonds (OFZ), in terms of coupon income, the most profitable for investors were floaters linked to the RUONIA rate: if at the beginning of the year its value was 7.34% per annum, then at the end of December it was already 15.53%, notes senior analyst at RSHB Asset Management Pavel Paevsky.

Long OFZs with a fixed coupon experienced price pressure against the backdrop of a rate hike.

The situation in the corporate debt market during the year was multidirectional, continues Paevsky: “Securities in the financial and oil and gas sectors at comparable durations (effective term to maturity of the paper. – RBC) showed relatively stable dynamics in comparison with non-food retail, mechanical engineering, woodworking and other industries. Issuers from industries with less financial stability, especially whose businesses are vulnerable to sanctions rhetoric (for example, export-oriented issuers), showed a deterioration in their financial position and, as a result, a decrease in the value of securities.” The development sector was also under significant pressure, whose securities came under pressure as requirements for preferential government programs tightened; this will continue in 2024, since there is a high probability of complete cancellation of some preferential mortgage programs, the expert adds.

Investments in replacement bonds also remained successful for investors, despite some volatility in these securities in the middle of the year. The index of replacement bonds, which is calculated by Cbonds, ends the year near historical highs – 115.49 points (versus 105.2 points at the beginning of January 2023), says Vasily Karpunin, head of the information and analytical content department at BCS World of Investments. “In addition, it is worth remembering that replacement bonds are tied to exchange rates. That is, taking into account the growth of the dollar in rubles, the profitability of a number of long dollar issues during the year could be more than 40%,” the expert clarifies.

For conservative strategies in 2024, corporate floaters of large companies that have a coupon premium to the RUONIA rate may be of interest; such securities are not exposed to interest rate risk, but with a decrease in inflation and the rate, the dynamics of the accumulated coupon yield for such securities will gradually slow down, notes Karpunin . A more risky strategy, according to the expert, is investing in long OFZs in the hope of their positive revaluation following a reduction in the Bank of Russia’s key rate.

Currency and gold

At the end of 2023, the ruble lost to all three major currencies: almost 24% to the US dollar, about 25% to the euro and about 17% to the Chinese yuan.

As of December 28, the dollar costs 89.36 ₽, the euro – 99.62 ₽, the yuan – 12.6 ₽

Alexey Bacherov, strategy manager at the Ricom-Trust investment company, believes that buying currency directly was not the most interesting investment, taking into account the sanctions and restrictions on its use. Chief Macroeconomist of the Management Company “Ingosstrakh — Investments” Anton Prokudin, on the contrary, considers currency “one of the best ideas of the outgoing year,” especially when it comes to foreign exchange instruments. “In addition to the revaluation of the currency component, the owner [замещающих] bonds [номинированных в долларах] was able to get a yield of about 5%,” the expert gives an example. Also, instead of replacement bonds, it was possible to use gold, also denominated in dollars, says Prokudin. In this case, the investor, in addition to the revaluation, could earn another 12% from the increase in value.

Alexandra Falkova, portfolio manager of Pervaya Management Company, also speaks of interest in gold along with substitute bonds. In her opinion, in 2023, gold has become an excellent tool for hedging currency risks. At this point there is a possibility that Fed The United States will move to lower the base rate next year, the expert continues, and this will reduce the attractiveness of US government bonds and have a negative impact on the US dollar, explains Falkova.

At the same time, the trend towards lowering the Fed rate may provide higher demand for gold due to more attractive prices for it in dollar terms, and also as an alternative to a protective asset instead of US Treasury bonds, the expert believes.

Deposits and money market funds

The income from deposits, provided they were opened at the beginning of 2023, amounted to a little more than 8% per annum – this was the rate in the top 10 banks in the first ten days of January, as follows from the monitoring of the Bank of Russia. This almost corresponds to the level of inflation that Vladimir Putin predicted during the press conference and direct line, and is 0.5 percentage points more than the inflation forecast from the Central Bank, which expects that by the end of the year prices will increase by 7-7.5 %.

At the end of September, the average maximum rates in the top 10 Russian banks for the first time since May 2022 became above 10% per annum following the tightening of the policy of the Central Bank, which began a cycle of rate increases in July. By the second half of December, the average maximum rate reached 14.5% (the key rate of the Central Bank is 16%).

Another popular low-risk instrument in 2023 was money market funds, which invest in short-term instruments with high liquidity – for example, repo transactions with the Central Counterparty (National Clearing House), short bonds. Over the year, the funds managed by Management Company Pervaya showed a return of about 9%, says Andrey Rusetsky, Investment Director at Pervaya. The funds quickly respond to an increase in the key rate, and also give the investor the opportunity to withdraw their funds at any time without loss of income, adds Nikolai Ryaskov, managing director for investments at PSB Management Company. He estimates that money market funds returned “just under 10%” to their owners in 2023. But in the long term and with the easing of the Central Bank’s policy, this instrument will lose to stocks or foreign currency bonds, the expert concludes: “Such investments should be considered as a temporary measure during periods of uncertainty in the market.”

The main cryptocurrencies showed significant growth at the end of the year: Bitcoin added almost 157%, ethereum – more than 97% in dollars (data as of December 28). Yields in rubles were higher due to the weakening of the Russian currency. The impressive dynamics are associated with the low base effect (currencies have grown after a 75% drop in capitalization from the peaks of 2021), a decrease in the risk of a recession in the United States and talk about launching an ETF for Bitcoin, explains Garantex Academy expert Semyon Nazarchuk.

2024 could also be a good year for cryptocurrencies due to the easing of the Fed’s policy (this contributes to an increase in demand for risky assets), the actual launch of ETFs for cryptocurrencies and the Bitcoin halving (a planned reduction in the number of newly issued Bitcoins), which always leads to an increase in prices, Nazarchuk believes.

At the same time, a number of services working with cryptocurrency are consistently limiting work with Russians from 2022. For example, at the end of 2023, two large platforms – OKX and Binance – introduced restrictions aimed at Russian users.

Evgenia Chernyshova, Elina Tikhonova

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