MOSCOW, June 30 – PRIME. Analysts of investment companies and banks expect the growth of the Russian stock market in July according to the Moscow Exchange index and the depreciation of the ruble against the dollar and the euro, according to a survey conducted by RIA Novosti.
Oil prices fell, breaking the longest period of growth since 2011
In accordance with the consensus forecast, compiled on the basis of analysts’ expectations, the Moscow Exchange index in July will grow by 0.97%, to 2226.25 points, the RTS will fall by 2.09%, to 1316.87 points against the background of the growth of the dollar against the ruble .
The price of Brent crude oil will rise by $2.22, to $113.12 per barrel, the euro exchange rate on Forex will drop by 1 cent, to $1.04, the price of gold will slightly decrease within 20 cents, to $1,812 per troy ounce , inflation in the Russian Federation will be 0.2% per month, analysts estimate.
The dollar will jump by 3.72 rubles, to 55.17 rubles, the euro – by 4.19 rubles, to 57.88 rubles, analysts expect.
Evgeny Loktyukhov from Promsvyazbank fears that developed countries may enter a recession phase as early as this year, they say this: worsening business activity and rising rates in developed countries, as well as continued high price pressure, which is largely non-monetary due to sanctions and consequences of lockdowns in China. The expert sees the risk of maintaining negative sentiment in global markets in the coming months.
The ECB meeting will be held on July 21, the regulator is completing the anti-crisis program of asset purchases and so far focuses on raising key rates by 25 basis points, but does not rule out an increase of 50 basis points, the latter looks more likely, the analyst notes.
He also recalls that on July 26-27, the US Federal Reserve System will hold its meeting, which has already announced that the “haik” could amount to 75 basis points, as in June.
The key risk for global markets in July and in the second half of the year as a whole is a possible recession in the United States as a result of the rapid tightening of monetary policy by the Fed, said Vladimir Evstifiev from Bank Zenit.
Commodity prices and global markets may “slip” in the light of deteriorating macro indicators in the US and Europe and the simultaneous tightening of monetary policy by key central banks in order to contain rampant inflation, Alexander Bakhtin from BCS Mir Investments believes.
Andrei Manko from RIA Rating believes that commodity markets will benefit from increased demand for resources in Southeast Asia, from geopolitical risks amid the Russia-Ukraine conflict, as well as from high inflationary expectations. Most likely, oil will trade above $110 per barrel for the whole month, and the expert also expects a new test of the $120 per barrel level.
Against the background of the continuation of the cycle of increasing rates, gold is likely to remain under downward pressure and continue trading in the region of $1,800 per troy ounce, Elena Kozhukhova from Veles Capital believes.
“The Russian economy will continue its gradual slowdown. Inflation will rise in the first weeks of the month due to tariff increases, but then seasonal deflation may begin,” says Valery Vaisberg from Region Asset Management.
DYNAMICS OF INDICES
Andrey Vernikov from Univer Capital expects the Moscow exchange index to move sideways in July: after Lukoil, Gazprom and some other issuers refused to pay dividends, investors have little reason to buy Russian shares.
“The Russian stock market has not yet adapted to the new realities, which will result in very high volatility. The Moscow Exchange Index will trade in the range of 2200-2500 points, and we expect that most of the time trading will take place at the lower limit of this range, ”says Manko from RIA Rating.
The Russian stock market in July, especially in the second half of the month after the main dividend cut-offs, may face increased downside risks due to the loss of important short-term growth drivers by many companies and ongoing economic uncertainty, says Veles Capital’s Kozhukhova.
At the end of July, an additional negative factor for Russian companies could be the publication of half-year results due to the risks of both a decrease in key financial indicators and a deterioration in forecasts for the medium term after taking into account the first sanctions effects, she draws attention.
Loktyukhov from Promsvyazbank fears that the lack of ideology in the key “chips” of the commodity sectors in the context of a strong ruble and continued heightened economic uncertainty, as well as negative external conditions, may lead the Moscow Exchange index lower in July to around 2,000 points.
THE RUBLE WILL STRENGTHEN, BUT THEY WILL TRY TO KEEP IT UP
Viktor Grigoriev of Bank Saint-Petersburg believes that the developments of the first week, when the government should reveal details of measures aimed at containing the ruble, will be especially important for the dynamics of the ruble in the coming month. In his opinion, investors will be waiting for details on the proposed mechanism for foreign exchange interventions using friendly currencies.
“In general, in July, the demand for foreign currency due to import restrictions is likely to remain low, and against the backdrop of a significant influx of foreign exchange earnings, the dollar exchange rate still has the potential to fall below 50 rubles for a while. Further strengthening of the ruble in the coming month, however, can be curbed by new government actions – if they are implemented in July, then by the end of the month the dollar will probably return to levels above 55 rubles, ”the expert predicts.
Andrei Manko from RIA Rating shares his opinion that the ruble has not yet exhausted its potential for strengthening, and this may lead to new “records”. “We expect to see the exchange rate below 49 rubles per dollar within a month, however, an even more radical strengthening of the national currency is unlikely,” he believes.
“A decrease in gas exports to Europe in June and, probably, in July, will lead to a reduction in the sale of foreign exchange earnings, while imports will continue to recover,” suggests Valery Vaysberg from the Management Company “Region Esset”
Andrey Vernikov from the IG “Univer Capital” draws attention to the fact that the exchange rates of unfriendly countries in June were at a local minimum, in July, measures to increase them through cross-rates of friendly currencies can have a certain effect. “I expect a slight increase in the dollar and euro. The dollar may rise to 55-56 rubles, ”the expert makes a forecast.
“In July, the position of the Russian currency at peaks since 2015, as well as the concern of the Russian authorities with its excessive strengthening and the possibility of introducing new measures aimed at easing currency restrictions, may come out against the ruble in July,” said Elena Kozhukhova, an analyst at Veles Capital investment company.
However, with capital restrictions, a sharp decline in imports, and sanctions risks, foreign currency is unlikely to be in strong demand, protecting the ruble from a sharp depreciation, she notes. “Some upward correction of the dollar and the euro, however, seems quite possible,” Kozhukhova predicts.
Andrey Kochetkov from Otkritie Investments notes that the ruble may weaken slightly in July amid a reduction in exports to Europe and an increase in imports, including mechanisms for parallel imports of goods. “We can also expect easing of foreign exchange controls for individuals. If the tendency for the ruble to strengthen continues, the RF Ministry of Finance may start operations on foreign exchange interventions in friendly currencies,” the expert concludes.
“In the stock market, preference will be given to companies from non-cyclical sectors, it is possible to maintain positions in the commodity sector against the backdrop of high prices for the main positions of commodity markets. In the context of a slowdown in the global economy, the high-tech sector may look less interesting, while the shares of defensive industries may show growth, ”says Evstifiev from Zenit Bank.
Manko from RIA Rating believes that shares of Russian retailers and construction companies will look somewhat better than the market, and shares of metallurgists and machine-building companies will look worse than the market.
“It is likely that the Central Bank of the Russian Federation will continue to reduce the rate at the July meeting. This will reduce the attractiveness of deposits and slightly improve the attitude towards the stock market. However, the prospects for Russian exports to Europe will continue to deteriorate, which will reduce the income of domestic exporters,” said Andrey Kochetkov from Otkritie Investments.
Kozhukhova from Veles Capital believes that positive surprises may come for issuers that are less affected by the sanctions, such as fertilizer producers, telecommunications, electricity and retailers. There is no need to talk about improving the geopolitical situation yet, but this factor will be realized sooner or later, the analyst adds.
Loktyukhov from Promsvyazbank believes that domestic sectors that are not subject to significant sanctions and economic risks, or are already taking them into account, may outperform the market in July. The expert expects new attempts to develop recovery in the shares of the financial sector.
Also, the expert looks positively at the papers of developers (PIK, Samolet), which can grow in the face of lower mortgage rates, as well as individual ideological “papers” of the consumer sector (Children’s World).
“We are counting on some, already overdue, weakening of the ruble – we are waiting for more decisive government measures to normalize the exchange rate and a gradual restoration of imports, which will also serve to restore interest in the shares of steel companies,” he adds.