Jpmorgan Russian Securit... Share Discussion Threads

[quepassa] 28/7/2016 13:26

Thank you for useful and informative update.

QP

[loganair] 28/7/2016 13:17

Russia's inflation rate has droped to 7.2% down from 9.4% this time last year.

Despite the weakness in the Russian economy, the Russian Central Bank has bolstered its foreign reserves from about $350 billion a year ago to over $390 billion at the end of June 2016. The Russian Central Bank has a stated goal of increasing reserves to about $500 billion in the coming years.

The Russian Central Bank announced this week that its gold reserves had reached 48.2 million troy ounces (approximately 1,500 metric tons). The total included an additional 600,000 ounces (approximately 19 tons) of gold added in June.

Though it is the world's biggest producer, China cannot keep up with its demand for gold. China's consumption of gold is set to reach 1200 tons annually by 2020 so China is looking to Russia to supply its gold.

[loganair] 28/7/2016 13:10

EBITDA margin back to excellent levels ... Magnit (JRS 3rd Largest Investment) yesterday released strong 2Q16 unaudited IFRS results, surprising the market on profitability which recovered after a very weak performance in 1Q16. Revenues rose 12.8% YoY to RUB266 bln ($4.0 bln), in line with the previously released operating updates. EBITDA rose similarly by 12.7% YoY to RUB31.8 bln ($483 mln), 17% above consensus expectations. The EBITDA margin was virtually flat YoY at 11.95% and increased 4.2 ppt QoQ, exceeding market estimates by 1.7 ppt. Net income rose 13.1% YoY to RUB17.8 bln ($271 mln), beating market expectations by 25%.

[knowing] 28/7/2016 10:57

MOSCOW--Russia's economy looks poised for returning to growth this year with annual economic contraction slowing sharply in the second quarter, data from the economy ministry showed Thursday.

Russia's economy has struggled since 2014, hit by low prices for oil, its key export, and Western sanctions following Moscow's annexation of Crimea.

The economy ministry said gross domestic product shrank 0.6% on the year in the second quarter after falling 1.2% in the first quarter. On a monthly basis, however, seasonally-adjusted GDP was unchanged in June from -0.1% in May and -0.2% in April.

The figures reflect a recovery in industrial output and stronger activity in transport and agriculture sectors, the economy ministry said. Retail sales, which mirror consumer demand, and construction activity, however, retained their negative impact on GDP in the second quarter.

Russian officials have said the economy had started to bottom out for more than a year but evidence of a turnaround in the economy hadn't materialized until now.

There are, however, differences in the official forecasts for the economy in 2016, predicated on the outlook for the price of oil, which has started to decline after a rally in the preceeding five months. The Bank of Russia expects the economy to lose up to 1% of its value this year, while the economy ministry says GDP may post some growth in the whole of 2016, after contracting by 3.7% in 2015.

[its the oxman] 15/7/2016 16:21

Share price rising steadily. Wish I bought more now sub 300p. Still at a massive discount though it may require a change in Russia's combative political stance to reduce it meaningfully. One day it could happen though.

[loganair] 12/7/2016 11:05

Sales growth in accelerates in June - Monthly revenues grow 13.5% YoY. Magnit (JRS 2nd Largest Investment) published a moderate trading data for June yesterday, reflecting stronger YoY consolidated sales growth of 13.5% to RUB89.1 bln ($1.37 bln) in June compared to 9.6% in May. The company’s convenience stores, its main business segment, expanded at a slightly slower pace of 13.3% to RUB66.4 bln ($1 bln), while the decline in sales at its hypermarkets accelerated to 2.1% YoY, sliding to RUB13 bln ($200 mln) after contracting 0.2% YoY in May. Sales in the Magnit Family segment rose 31% YoY to RUB4.7 bln ($72 mln), while sales at its drogerie stores increased 64% to RUB5 bln ($77 mln). Revenues reached RUB265.0 bln in 2Q16, increasing 12.6% YoY with sales at convenience stores growing 12.3% YoY, Family stores gaining 30.2% and drogerie stores advancing 70.1%, while sales at hypermarkets fell almost 3%.

[loganair] 27/6/2016 17:05

What I´ve been reading is an easing of sanctions. In my opinion a Brexit makes an easing more likely as this will also help the economies of the EU.

"The French and German stock markets have both fallen by more than Britain’s during the last two days because Brexit is seen as having the potential to drag down the entire eurozone economy."

When the UK finally leaves this is really going to hit the fishing fleets of France and the Med countries as they´ll lose the right to fish in most of the North Sea and half of the Irish Sea.

[rupe1958] 27/6/2016 12:37

But if they are removed - and the UK's sad departure from the EU makes this more likely - that would surely be a bonus to Russian stocks?

[loganair] 25/6/2016 10:22

What I have noticed there has been some what of a decoupling of the Rouble from the price of oil.

In Rouble terms the price of oil has remained pretty constant at around 3,400 roubles per barrel.

When it comes to sanctions I´ve read that next time round in 6 months they will not automatically be renewed, there will be discussions amongst the EU Governments with many wanting an easing of sanctions.

[rupe1958] 24/6/2016 23:37

It's interesting that the share price of JRS has risen quite sharply today despite the lower oil price and a lower ruble.

Perhaps this because the prospect of the EU sanctions on Russia being lifted has improved with the imminent departure of the UK from Brussels.

[loganair] 17/6/2016 13:33

Moscow Times by Peter Hobson - Hanging in There: A Guide to Russia's Economy:

In late May, Prime Minister Dmitry Medvedev inadvertently caught the mood of the nation.

On a tour of Crimea, Medvedev was confronted by an angry woman, who demanded to know when the government planned to raise her 8,000 ruble ($125) per month state pension. "You can't live on this!" the woman cried. "Prices are rising madly."

The prime minister's reply was frank. "There's just no money," he said, struggling to be heard above the complaints. "When we find the money — we'll do it." Then he turned to leave with the parting words: "You hang on in there. Have a good day. All the best."

Captured on camera, the remark went viral. Commentators and social networks fizzed with ridicule. After two years of confrontation with the West over Ukraine and 16 years of President Vladimir Putin, Medvedev seemed to have exposed the extent of Russia's economic and political dead end.

For the first time in years, state pension payouts have fallen behind rising prices. The economy is shrinking for a second consecutive year. Without fundamental reform, a long period of stagnation beckons.

Against this backdrop, some 10,000 businesspeople, officials and journalists gather in St. Petersburg on Thursday for Russia's version of the Davos economic forum. The Moscow Times looked at the key political and economic questions that will dominate the event.

Sanctions:

Ever since Russia annexed the Crimean Peninsula and fomented violent separatism in eastern Ukraine in early 2014, the St. Petersburg International Economic Forum has been the site of political drama.

Together with their allies, the United States and the European Union imposed sanctions on Russia to limit its access to international capital, investment and technology. They also put heavy pressure on their businesses to boycott the forum, which is hosted by Putin.

Two years on, that pressure is more patchy. As in previous years, not a single U.S. official will attend the forum. Most Western companies, however, responded to the boycott not with fewer delegates, but by sending more junior delegations. And some big political names do plan to attend, including Jean-Claude Juncker, the president of the European Commission, and Matteo Renzi, Italian prime minister.

The atmosphere has shifted, says Alexis Rodzianko, the head of the American Chamber of Commerce in Russia. This year, he says, "there is no expectation for an increase in sanctions and some hope that maybe we're looking at a horizon where sanctions might be lightened."

This is not the result of any Russian retreat. The war in eastern Ukraine, which has killed 9,000, simmers on, with the death toll rising weekly. Crimea, now a Russian region, will have an official delegation in St. Petersburg and a stand displaying local investment opportunities.

Many in Europe are frustrated with sanctions. Together with Russian countermeasures, they have cost companies billions of dollars. The EU will likely prolong its sanctions at a meeting later this month, but diplomats have warned of a showdown later this year when the measures again come up for renewal.

On June 8, France's senate voted to "gradually and partially" lift sanctions by a margin of 302 votes to 16. The vote is non-binding on the government, but was the latest sign of discord.

Russian officials, meanwhile, make a show of not caring about sanctions. Russia has "fully adapted," Economic Development Minister Alexei Ulyukayev said last month. "Honestly, I don't see any macroeconomic effect [from sanctions] at all."

That may be bluster. But Capital Economics, an analysis firm, says the lifting of EU sanctions would likely add only 0.5 percent to Russian economic growth.

Oil Price:

In fact, the key driver of the Russian economy is the oil price.

Here, there seems at least to be some good news. Crude prices have almost doubled since hitting 13-year lows of less than $30 per barrel in January.

But prices are still far below last year's levels. Even with the rebound, the Russian Central Bank forecasts an average of around $40 per barrel for this year and in 2017. That would be around $15 dollars per barrel less than the average last year — when Russia's economy shrank by 3.7 percent.

What's more, Russian oil output, which has risen to post-Soviet record levels of close to 11 million barrels a day, will likely start to fall this year as lower prices, increased taxes and the West's sanctions starve the sector of long-term finance, according to a recent report by the Fitch ratings agency.

The collapse in oil prices has transformed the structure of the government's finances. Before 2015, more than half of budget revenues came from taxes on the energy sector. Last year, the percentage fell to 43 percent. In the first quarter of this year, it was just 34 percent.

That means that the government has to find other sources of cash.

Growth vs. Stagnation:

One thing helping the economy is the ruble. Russia was able to avoid a deep crisis thanks to the devaluation of its currency. Even as the dollar value of oil fell by more than half, its value in rubles stayed roughly the same. This allowed oil companies and the government to maintain their ruble spending.

The devaluation also created economic opportunities.

The weak currency has forced more Russians to vacation at home and made it cheaper for foreign tourists to visit. The number of Chinese tourists coming to Russia rose to more than 1.3 million in 2015, according to the Federal Tourism Agency — a 64 percent increase from the year before.

Agricultural production is also rising — by 2.8 percent in the first four months of this year, according to Ulyukayev, the economic development minister. Last year, agricultural exports rose to some $20 billion, outstripping arms exports.

"The main message from officials at the forum will be that Russia has proven much more resilient in the face of sanctions and low oil prices than was expected," says Chris Weafer, a Russia veteran and partner at consultants Macro-Advisory in Moscow.

But these bright spots have many caveats. Weafer's analogy is a body that has fallen off a building and smacked into the pavement. "The good news is that it's not falling any further," he says. "The bad news is it's broken."

Analysts expect the economy to start to grow again later this year. But beyond that looms a long period of economic stagnation. Many Russian companies are accumulating profits, but few want to invest.

Part of the problem are high levels of risk and insecurity. If, for example, the oil price rises and strengthens the ruble, those who bet on industries that benefit from a weak ruble could lose their investments.

More fundamentally, global growth has slowed, which means the world wants less of the metal, oil and gas that Russia produces.

And at home, Russians are spending less. Price increases and stagnant wages have made people markedly poorer. Almost nine in every 10 Russians have seen their incomes fall in real terms over the past year, according to a new report by PricewaterhouseCoopers, the financial services firm. The impoverishment is even deeper outside Moscow, which has maintained relative prosperity, the report found.

The investment climate has also become more dangerous, says Andrei Movchan, an economist at the Carnegie Center in Moscow and a former money manager. He says the recession has shrunk the pool of available assets and made those with links to officials and law enforcement more aggressive in their efforts to make money — by fair means or foul.

Meanwhile, Ulyukayev says the working population is due to shrink by between 200,000 and 300,000 people per year for the next decade. The number of pensioners without savings teetering on the edge of poverty will rise. "Even with $100 oil, we won't be able to grow at more than 1.5-2 percent per year without structural reform and an improvement in the investment climate," says Elvira Nabiullina, the head of the Central Bank.

Growth of less than 2 percent would result in Russia lagging behind the global average, further reducing the country's competitiveness and relative wellbeing. In effect, says Movchan, Russia will be relegated to a second or third league of nations: "It'll be rivaling not Portugal, for example, but Romania and Vietnam."

Many richer Russians are already losing patience. A recent survey by headhunters Kontakt suggested that more than 40 percent of Russian executives were ready to emigrate.

Reform:


Faced the threat of stagnation, the government wants to act.

The Central Bank in June reduced its benchmark interest rate for the first time in nearly a year, to 10.5 percent, making it cheaper to borrow.

The government meanwhile plans to sell shares later this year in companies such as oil producers Rosneft and Bashneft, and Alrosa, a diamond miner. This should earn money for the budget and encourage better management. But Putin has said he will accept only sales to strategic investors or Russian buyers. Analysts fear that such privatization could see the state's preferred candidates snap up assets with funds from state banks — perhaps deepening existing Russian cronyism.

Many ministers are thinking strategically. In early June, Ulyukayev published in Vedomosti, a business newspaper, a manifesto of state measures to boost investment by 7-8 percent per year and double the country's growth potential to 4 percent. A day later, Medvedev blessed a plan to double the share of small- and medium-sized businesses in the economy from 20 percent to 40 percent — close to the level common in developed nations.

That problem is that these solutions rely on state intervention and their advocates are powerless, says Movchan. Real influence is held not by technocratic ministers, but by Putin and a small circle of advisors, many of them drawn from the country's law enforcement structures.

Former Finance Minister Alexei Kudrin has in recent months emerged as a standard-bearer for structural reform. In April, he was appointed to an advisory role to the president. The understanding is that he will lobby for prudent government spending, greater productivity and a trimming of the state. But the extent of his real influence is unclear.

Political Change?

Few people expect the system to fall apart any time soon. The country still has sizable hard currency reserves and a healthy trade surplus.

The economy continues to function, even if poorly. Rodzianko said that U.S. multinationals surveyed by the American Chamber of Commerce planned to raise investment roughly 15 percent above last year, admittedly from a low base.

Unrest has flared in some towns, particularly industrial centers, which have suffered layoffs and wage cuts. But protest remains sporadic. Ahead of parliamentary elections later this year, the authorities have tightened their grip on civil society and media.

Four out of every five Russians still say they support Putin. "Society values stability much more than prosperity," says Movchan.

With change far from the agenda, many Russians have instead taken refuge in self-mockery. Following Medvedev's pensions gaffe, the songwriter comedian Semyon Slepakov recorded his own "prime ministerial address to the people." The ditty riffs policy breakthroughs with international trade deals, spearheaded by officials working for the people all hours of the day. The video has been viewed 7 million times since it was uploaded in early June.

"I'm glad to tell you what we've achieved in recent years," trills Slepakov's Medvedev.

"We have results!

There's just no money."  ;

[loganair] 16/6/2016 12:07

GDP contraction eases for third consecutive quarter, with growth to resume by year-end.

GDP contraction continued to ease in 1Q16 ... Yesterday Rosstat reaffirmed its initial GDP estimate for 1Q16, which saw it ease to minus 1.2% YoY from a drop of 3.8% YoY in 4Q15. That was the third consecutive quarter the contraction in GDP has eased since the peak of the recession in 2Q15, when it dropped 4.5% YoY. Nominal GDP reached RUB18.6 tln in 1Q16.

[loganair] 13/6/2016 17:09

firt - It seems to me you misunderstood what I wrote. Krushchev was Ukrainian by ethnicity. Crimea was part of the Russian Republic until the mid 1950´s when he gave it to become part of Urkraine which was alright when it and the Russian Republic were both part of the Soviet Union.

I know many Russians and for them it was Ukraine that was occupying the Crimea and wanted it returned to Russia.

The Anschless is completely different, as Austria was not part of Germany and the people didn´t want it and I would not have supported such a move, in the same way I wouldn´t support Russia moving into Estonia which in my good opinion they will not do and have no plans to do.

[rupe1958] 13/6/2016 13:13

A nice rise on the NAV to £4.14. The discount has widened to over 16% (from mid-price).
If oil prices can hold over $50 and if the EU continues moving towards a relaxation of the sanctions, we could see the Russian index rising and the discount closing towards 10%.

[loganair] 10/6/2016 14:46

A fiscal mechanism that’s under discussion would prevent the government from spending surplus revenue above a pre-set oil price and insulate the economy from the ups and downs in crude. “In the medium term, there’s a clear understanding that in preparing a new budget rule, if oil prices exceed $50, then all additional income will need to be withdrawn into reserves,” Anton Siluanov told reporters in Moscow.

Its finances reeling after crude fell to a 13-year low in January, Russia is revisiting a policy suspended this year that capped spending based on a backward-looking average for oil. While a rebound on commodity markets has lifted the ruble, its comeback has lagged the gains in crude, meaning the government stands to get more revenue as a barrel of oil in local-currency terms rises to near the highest since November. The price of oil in rubles is at 3,346, compared with the level of 3,165 which Russia used as a basis for this year’s budget.

The government is debating offering shares in state-run companies. Plans to sell stakes in diamond miner Alrosa PJSC (JRS 6th Largest Investment) and oil producers Rosneft OJSC ((JRS 4th Largest Invesent) and Bashneft PJSC are still in place for this year, according to Siluanov. The situation with Rosneft is “more complicated,” he said without elaborating. Russia was considering plans to sell 19.5 percent in the world’s biggest publicly traded oil producer.

Rosneft, it is expected that a stake of 5 percent to 7 percent will placed on a bourse and the rest in a deal with strategic investors, Economy Minister Alexei Ulyukayev told reporters on Wednesday in Minsk, Belarus. An offering of stock in Alrosa will almost certainly go first, and Bashneft is “also very close,” he said.

[loganair] 10/6/2016 13:57

The European Union should seek to create a common economic zone from Lisbon to Vladivostok in the long term, German Chancellor Angela Merkel said on Friday speaking at the German Family Businesses Day conference.

"We should move gradually towards this goal," the chancellor said.

She added that the sanctions imposed on Russia are not an aim itself and that they depend on the implementation of the Minsk accords, which, according to Merkel, are "the key to lifting" the restrictive measures.

[loganair] 10/6/2016 13:50

IntelliNews - The Central Bank of Russia today cut its key interest rate from 11% to 10.5%, showing readiness to resume the monetary easing cycle that has been on hold since August 2015 as a result of the central bank's inflation-curbing efforts.

Analysts were evenly divided over whether the head of the CBR, Elvira Nabiullina, would make the long-anticipated move to cut the painfully high 11% rate as a way to help accelerate the return to economic growth that is widely expected for the second half of this year.

bne IntelliNews analysis suggested that as inflation has been largely tamed for now, the CBR's move to cut the interest rate will help the Kremlin in its third big structural reform drive, “Plan K”, led by former finance minister Alexey Kudrin, which will attempt to switch the economic growth driver from consumption to investment.

Despite some analysts warning that the CBR will be wary of a slight uptick in annual inflation acceleration expected in June-July, the central bank said in press release today that its “confidence in the stability of positive inflationary tendencies has increased”.

Inflation has now also steadied at around 7.3 percent, according to the central bank, its lowest level since 2014. The bank said that it was now marking down its inflation forecast for the end of 2016 to between five and six percent and said inflation would hit its long-term target of four percent by the end of 2017.

One of the concerns has been that the Kremlin will boost social spending in the run-up to the September general election, which would stoke inflation. But clearly Nabiullina has decided that with the budget deficit expected to be just under 4% of GDP by the end of this year, the Kremlin simply doesn't have the money for much vote-winning largesse and the danger of politically driven inflation remains small. On the other side of the coin, with oil prices up to around $50, some of the pressure has come off the budget and created a little more wiggle room than was expected only a fwe months ago.

But referring to recent surprise data for first-quarter GDP and income, the CBR said that improving economic activity is not creating additional upward pressure on consumer prices. The central bank thus sees its target of curbing annual inflation rate to 4% by the end of 2017 as achievable.

The recent growing consensus on the recession being over by the end of the year is shared by the CBR: quarterly GDP growth is expected to resume no later than the second half of 2016, the statement reads, with a rebound to 1.3% growth for 2017 forecasted at $40/barrel oil. However, the CBR remains cautious and did not promise an unconditional resumption of the easy monetary cycle.

Inflationary expectations could reignite, the regulator warned, naming the absence of a mid-term fiscal consolidation strategy, uncertainty over pension and wages indexation, as well as global volatility as the main risk factors. Thus, the CBR will watch those closely when evaluating whether there is room to cut the rate further at the next meeting of July 29.

Previously, Nabiullina and other central bankers already identified fiscal risks as the main potential contagion for the economy and they remain largely unaddressed, with Reserve Fund spending by the government translating into an influx of liquidity and additional inflationary pressures.

This growing liquidity surplus in the banking sector was also addressed by the CBR, which said it will seek to absorb excess liquidity.

[loganair] 10/6/2016 13:40

Revenues grow 9.6% YoY, slowing 5.1 ppt MoM. Magnit (JRS 2nd Largest Investment) published a disappointing trading update for May yesterday. Revenue growth slowed notably MoM in all its business segments. Consolidated revenues rose a mere 9.6%YoY to RUB87.8 bln ($1.3 bln), 5.1 ppt slower than in April. Sales growth in the company’s key convenience stores segment rose at the same pace as total sales – 9.6%% YoY (contracting 4.5 ppt MoM) to RUB65.6 bln ($999 mln). Sales in Magnit’s hypermarkets division declined 6.4% YoY to RUB13.0 bln ($198 mln) after remaining flat YoY in April. In the Magnit family segment, sales rose 25.5% YoY to RUB4.6 bln ($70 mln), a slowdown of 8.8 ppt MoM. Revenues in the cosmetics segment rose 69.4% YoY to RUB4.5 bln ($69 mln), still implying a slowdown of 9.2 ppt in growth MoM.

[loganair] 10/6/2016 13:39

BITDA 12% below consensus, down 1% QoQ. Tatneft (JRS 10th Largest Investment) published 1Q16 IFRS results yesterday and plans to hold a conference call today. Revenues declined 10% YoY and 13% QoQ to RUB121bln ($1.62 bln), 9% below the Interfax consensus. EBITDA fell 31% YoY and 1% QoQ to RUB30.6 bln ($0.41 bln), 12% below the consensus. In dollar terms, EBITDA declined 43% YoY and 12% QoQ. The EBITDA margin narrowed 7.6 ppt YoY and widened by 3.0 ppt QoQ to 25.3%. Net income was RUB17.1 bln ($0.23 bln), down 36% YoY and 13% QoQ, 12% below the consensus.

[loganair] 06/6/2016 10:12

Russia’s economy prepares for growth. The key indicators for 4M16 clearly show that the Russian economy is stabilizing. The market expects moderate growth in resource extraction to continue and manufacturing to gradually gain pace in 2H16. Besides export oriented sectors, the market expects moderate growth in the production of foods, machinery and equipment, and light industry. However, consumer demand will remain weak this year, but will improve next year due to growth in real incomes, supported by a recovery in the oil price and moderate growth in developed countries.