Negativity from China will hold back the Russian market | December 7, 2023

Source: Freepik

The external background before the start of trading in Russia is negative. Oil prices are rising, but these are only modest attempts to compensate for the deep weekly decline. Oil imports to China decreased significantly compared to October. Asian markets traded in the red against the backdrop of weak statistics from China. The yen strengthened, putting pressure on Japanese stocks. The Russian ruble weakened in morning trading. The current situation speaks in favor of the Russian market starting trading in the red.

The Russian market ended Wednesday’s trading in a significant minus. The weakening of the ruble could not help him. Sberbank shares fell significantly in price on the background of Investor Day. Oil showed an active decline, which had a negative impact on shares of the oil and gas sector, and on the entire market. Moscow Exchange is preparing new measures to combat abnormal changes in the value of securities. The volume of transactions on the main section of the Moscow Exchange amounted to 59.384 billion rubles.

According to the results of trading on December 6, the Moscow Exchange Index was 3079.5 points (-1.59%), and the RTS Index was 1045.28 points (-1.96%).

All 10 sectoral indices of the Russian market showed a decline. The largest losses were in the electricity sector (-1.81%), telecommunications (-2.35%), finance (-1.73%) and transport (-1.94%).

Moscow Exchange jointly with the Bank of Russia and market participants continues to develop and implement measures to counter destabilization and high volatility of stock prices. From December 25, a mechanism for limiting aggressive limit orders will be launched. The maximum deviation of order execution prices will be set at 5% from the price of the best counter order at the time of submitting a limit order for securities and shares.

Papers “Magnet“(MGNT) finished the day in the green. The retail chain announced the launch of the store format “Magnet near”. These are compact retail outlets near households, which makes it convenient to regularly purchase the most popular goods in the household. We are talking about 1300−1600 names of various food items. Basically, Magnit Nearby stores will be located in residential areas where it is impossible to create a larger-scale retail format.

The main news provider on Wednesday was Sberbank (SBER), which is hosting an investor day. The key point for the market is the parameters of the new dividend policy. The bank plans to increase profits and dividends over the next three years. However, one of the key points is that Sberbank will comply with the capital adequacy requirement of 13.3%. One of the reasons for additional accrual of reserves may be changes in the parameters of preferential mortgages. Accordingly, some overly optimistic dividend expectations for 2023 may not materialize. However, the principle of paying 50% of profits remains and an increase in payments relative to the volume of 2022 is expected. At the end of 2022, Sberbank allocated 565 billion rubles for dividends. Profit for 10 months of the current year exceeds 1.26 trillion rubles. That is, it remains to be seen how much will be used to replenish reserves.

In the evening, news arrived that the G7 countries had nevertheless announced a ban on the import of Russian diamonds from January 1. Direct imports will be banned immediately, and indirect imports will be banned in stages from March 1 to September 1. At the initial stage, restrictions will apply to uncut stones, but there are no agreements regarding cut stones yet. G7 members also pledged to tighten compliance with the oil price ceiling.

At the end of November, the number of individuals with brokerage accounts on the Moscow Exchange reached 29.2 million. They opened 50.9 million accounts. Transactions were carried out by 3.7 million people in November. The share in the trading volume in shares was 76%, in bonds – 33%, in the spot currency market – 16%, and in the derivatives market – 68%. Thus, individuals continue to have the greatest influence through their actions on the dynamics of stock trading. The composition of the most traded stocks remains almost unchanged.

Speaking about the market from a technical perspective, we will pay attention to the fact that on Monday and Tuesday the Moscow Exchange index updated its minimums, but closed above 3100 points. However, on Wednesday the next minimum was updated and the Moscow Exchange Index closed below this support line. The next strong levels are 3000 points and the zone 2900−2920 points. Of course, in recent trading, the actively falling price of oil had a significant impact on the dynamics of shares, but the technical aspect also cannot be discounted. To return to upward dynamics, the Moscow Exchange Index needs to close the day and week above 3100 points.

The ruble had very volatile trading. However, the day’s attempt to strengthen was thwarted by the acceleration of the fall in oil prices. The dollar weakened during the day to 91.87 ₽, but by the evening it still closed above the resistance zone of 92.0–92.5. This does not yet cancel the possibility of a return to the range of 88.0−92.0, but the probability of a movement to 94.5−95.0 is already growing. Accordingly, to return to the previous range, it is necessary to close the day and week below 92.0 rubles on the dollar. Dollar trading volumes on Wednesday were higher than the previous day. In the USD/RUB pair there are 122.674 billion rubles, and in the CNY/RUB pair – 139.028 billion rubles. I still remember Tuesday’s news that the authorities of the Republic of Cyprus ordered their banks to completely abandon transactions with the ruble.

And a little, as is tradition on Wednesday, about inflation. According to the Ministry of Economic Development of the Russian Federation, in the week ending December 4, the weekly inflation rate slowed to 0.12%. The annual rate fell to 7.52%. The most noticeable increase of 1.94% was in fruits and vegetables. In non-food products, prices for electrical and household appliances resumed rising – 0.33%.

“This information is for informational purposes only and does not constitute an individual investment recommendation.”

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