AB-ICI: Some Recovery in Sentiment - Alfa-Bank

Transcription

AB-ICI: Some Recovery in Sentiment - Alfa-Bank
Macro Insights
AB-ICI: Some Recovery in Sentiment
Natalia Orlova
Dmitry Dolgin
(+7 495) 795-3677
(+7 495) 780-4724
April 1, 2015
[email protected]
[email protected]
www.alfa-bank.com
Moscow
Investment Summary
 AB-ICI recovered by 7% in February on recovery in the market sentiment following year-end collapse

2M15 GDP drop of 1.9% y/y was a positive surprise, full-year decline might be limited to 3%

CBR easing and budget policy do not help limiting the capital outflow, which remains a concern
AB-ICI recovered by 7% in February
AB-ICI was up 7% in
February on strong
recovery in market
sentiment
After 16% drop in December-January, AB-ICI recovered by 7% m/m in February,
reflecting the recovery in the market sentiment following the year-end collapse.
The return of the financial market to the peer trend after the year-end shock is
positive news, and it is supported by the smaller than expected 1.9% y/y GDP
drop in 2M15. However, net capital outflow remains an ongoing concern.
Economic confidence
recovered slightly on
better deposit trends;
capital outflow remains a
concern

Economic confidence recovered after two months of free-fall, reflecting
some improvement in the household savings: the higher level of interest
rates has stopped the outflow in ruble deposits, which have shown 3% m/m
growth in February. However, the net capital outflow data suggest that after
some deceleration in outflow to $9bn in January, the February outflow was
$15bn, which suggests little deceleration compared to last year’s outflow.
Preliminary data is
guiding for 50%
reduction of FDI inflows
2014

Foreign confidence declined accounting for the negative trend in FDI
inflows. Based on the CBR data, Russia saw a 50% y/y drop in the FDI
inflows in 9M14, which is the worst performance since 2009. The recent
news on GM willing to divest from Russia and a number of foreign banks
reducing presence is a negative guidance for the near term. At the same
time, the sharp ruble depreciation may still make Russia attractive for direct
investments once the growth trend normalizes.

Market confidence increased sharply in February after stable performance
in January, reflecting recovery in the bond markets. In February, ruble
appreciated 12% and continues to recover, returning to the trajectory seen
in EM and petro-currencies after December collapse. The decline in global
EM interest rates played role in boosting Russia’s attractiveness.
The market sentiment
towards Russian bonds
and ruble recovered after
December’s collapse
Figure 1: AB-ICI recovered 7% in February, still down 22% y/y
3000
RTS
RTS (LHS)
AB-ICI (rebased)
AB-ICI
1000
900
2500
800
2000
700
600
1500
500
1000
400
300
500
200
100
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
0
Source: New Economic School, RTS, Alfa Bank
Alfa Bank Investor Confidence Index
April 1, 2015: Some Recovery In Sentiment
1
Macro Insights
AB-ICI Recovery: Sentiment or Fundamentals?
Some recovery in ABICI is in line with
improvement in the
near-term GDP growth
prospects
Even if the 7% spike in the AB-ICI in February does not indicate a reversal in the
overall trend, it is definitely in line with the recent improvement in the sentiment
regarding the economic performance. In particular, while following the collapse of
the financial markets we and the market started to fear 5% GDP drop for 2015, the
recent macro figures indicate that the scale of the decline can be more modest. In
2M15, the decline was 1.9% y/y, and even if it reflects some deepening in the drop
from 1.4% y/y in January and 2.3% y/y in February, it still appears modest
compared to our initial fears. While we expect the decline in the GDP growth to
continue further into the year, now a 3% full-year GDP contraction appears to be a
more plausible scenario.
Consumption is
supported by
structurally low
unemployment…
The main reason why the deterioration of the economic trend is very limited is that
the consumption remains stronger than expected, with retail trade down 6.1% y/y
in 2M15. The first explanation is the structurally tight labor market, keeping
unemployment at 5.8%, still much lower than the 9.4% unemployment peak
reached in 2009. As a result, the decline in real salaries, even if approaching 10%
y/y, is mainly driven by the inflation, which seems to be stabilizing at the moment,
while the nominal salary growth remains positive at 5% y/y.
…and a looser than
expected CBR and
budget policies
The economic policy considerations also play a role in maintaining Russia’s
consumer focused model. First, the ahead of schedule decline in the CBR interest
rates keep the real deposit rates negative, discouraging savings. Second, the
budget policy appear supportive. The pension indexation will total 11% y/y this
year, and the overall spending plan for 2015E has not been cut contrary to the
previous expectations, as the Cabinet decided to spend the extra RUB1.5tr
proceeds coming from the ruble depreciation in the current 2014-15 spending
cycle.
Figure 2: Consumer trend fundamentals
20%
10,5%
Unemployment (RHS)
Retail trade, y/y
Real salaries, % y/y
15%
Figure 3: CBR key rate and inflation
20%
CPI, % y/y
CBR repo (key) rate, %
9,5%
10%
8,5%
5%
7,5%
15%
10%
0%
Source: Rosstat, CBR, Alfa Bank
Risks to ruble remain
significant
Jul-14
Feb-15
Dec-13
Oct-12
May-13
Mar-12
Aug-11
Jan-11
Jun-10
4,5%
Nov-09
-15%
Apr-09
5,5%
Sep-08
-10%
5%
0%
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
6,5%
-5%
Source: CBR, Rosstat, Alfa Bank
At the same time, the CBR move towards interest rate easing and the budget
preference for maintaining expenditure growth pose persistent inflationary risk and
offer bad long-term signs for ruble, which should limit the preference for corporate
investments and prevent FDI inflows from recovering even after the last round of
ruble depreciation. The February net outflow, which according to VEB estimates
was as high as $15bn, is an illustration of this view. As a result, we continue to see
risks to ruble stability, being a factor preventing strong recovery in the AB-ICI.
Alfa Bank Investor Confidence Index
April 1, 2015: Some Recovery In Sentiment
2
Macro Insights
RATING DEFINITIONS
Alfa Bank applies a three-tier rating system for stocks under coverage. These ratings are based on the expected total stock return, which is
the sum of the return to the target price and the expected dividend yield.
The ratings are:
Overweight (O/W):
Expected total stock return > 15%
Equal Weight (E/W):
Expected total stock return < 15% and > 0%
Underweight (U/W):
Expected total stock return < 0%
Owing to price volatility and our policy of not changing our ratings in response to frequent, short-term misalignments with expected returns,
our ratings may sometimes not conform with the ranges indicated above.
In addition to the ratings above, we may occasionally assign the following classifications to stocks covered:
Restricted (R):
A rating, target price or financial forecasts are not disclosed owing to compliance or other
regulatory considerations.
Under Review (U/R):
In response to recent or pending news flow requiring a significant overhaul or amendment of a
company’s financial model, the previous rating and/or target price is temporarily not disclosed.
Coverage in Transition (I/T)
Due to changes in the research team, the disclosure of a stock’s rating and/or any other stockspecific information is temporarily suspended. The stock stays in Alfa Bank’s coverage universe
and usual disclosures will be resumed in due course.
Not Rated (N/R)
The stock is not in Alfa Bank’s coverage universe at the time the research product referring to it is
published.
IMPORTANT INFORMATION
The contents of this document have been prepared by Open Joint Stock Company Alfa Bank ("Alfa Bank"), as Investment Research within
the meaning of Article 24 of Commission Directive 2006/73/EC implementing the Markets in Financial Instruments Directive 2004/39/EC
("MiFID"). Alfa Capital Markets ("ACM") is distributing this document to its clients in the EEA and accepts no responsibility towards any
other classes of recipient. Alfa Bank and ACM have in place appropriate conflicts of interest policies and procedures aimed at ensuring the
objectivity of the information contained in this document. The information contained in this document is provided for information purposes
only and is not a marketing communication, investment advice or personal recommendation within the meaning of MiFID. The information
must not be used or considered as an offer or solicitation of an offer to sell or to buy or subscribe for any securities or financial instruments.
In the UK, this document does not constitute a Financial Promotion within the meaning of section 21 of the Financial Services and Markets
Act 2000 (as amended). ACM is regulated by the Financial Conduct Authority (“FCA”) with FCA registration number 416251, for the
conduct of UK investment business and is the trading name of the UK branch of Alfa Capital Holdings (Cyprus) Limited (“ACC”), which is
authorized by the Cyprus Securities and Exchange Commission under license number CIF 025/04. This document is not for distribution to
retail clients as defined by MiFID and may not be communicated to such persons. This document is not for distribution or use by any
person or entity in any jurisdiction where such distribution or use would be contrary to local law or regulation or which would subject Alfa
Bank, ACC , ACM or any other group entity to authorization, licensing or other registration requirements under applicable laws. The
information contained in this document is the exclusive property of Alfa Bank. Unauthorized duplication, replication or dissemination of this
document, in whole or in part, without the express written consent of Alfa Bank is strictly prohibited. Although the information in this
document has been obtained from, and is based on, sources Alfa Bank believes to be reliable, no representation or warranty, express or
implied, is made by Alfa Bank, ACM or the authors. ACM and its officers and employees do not accept any responsibility as to the
accurateness or completeness of any information herein or as to whether any material facts have been omitted. All information stated
herein is subject to change without notice. ACM makes no warranty or representation that any securities referred to herein are suitable for
all recipients and any recipients considering investment decisions should seek appropriate independent advice. Nothing in this document
constitutes tax, legal or accounting advice. Alfa Bank, ACC and their associated companies, officers, directors or employees (excluding any
financial analysts or other personnel involved in the production of research), from time to time, may deal in, hold or act as market makers or
advisors, brokers or commercial and/or investment bankers in relation to the securities, financial instruments and companies mentioned in
this email, or may have been, or may be represented on the board of such companies. If such circumstances arise, ACM, Alfa Bank, ACC
and their associated companies have in place appropriate conflicts of interest policies and procedures to ensure that investment research
remains independent and objective. A summary of ACC's conflicts of interests policy (which also covers ACM), containing details relevant
to investment research, is available upon request from ACC or ACM. ACC and ACM have arranged for Alfa Bank and other relevant group
entities involved in the production of research to implement equivalent policies. This document is distributed in the United States by Alforma
Capital Markets, Inc., a subsidiary of Alfa Bank, which accepts responsibility for its contents. Alforma Capital Markets, Inc. did not
contribute to the preparation of this report and the authors are neither employed by, nor are associated persons of, Alforma Capital
Markets, Inc. The issuing entity and authors may not be subject to all of the disclosures and other US regulatory requirements to which
Alforma Capital Markets, Inc. and its employees are subject. Any US person receiving this report who wishes to effect transactions in any
securities referred to herein should contact Alforma Capital Markets, Inc., not its affiliates.
Alfa Bank is incorporated, focused and based in the Russian Federation and is not affiliated with US-based Alfa Insurance.
Alfa Bank Investor Confidence Index
April 1, 2015: Some Recovery In Sentiment
3
Equity Market
Head of Equities Alfa Bank
Michael Pijiolis 12, Akad. Sakharova Pr-t
+7 (495) 795-3712 Moscow, Russia 107078
Research Department
Macroeconomics
Natalia Orlova, Ph.D.
Dmitry Dolgin
+7 (495) 795-3676
[email protected]
Retail, Real Estate
795-3677 Andrei Nikitin
780-4724
[email protected]
[email protected]
[email protected]
795-3742
[email protected]
[email protected]
641-3673
974-2515
(ext. 8568)
Financial Sector, Internet
Marina Karapetyan
[email protected]
Alfa-Direct Research
795-3740 Geldy Soyunov
Alan Kaziev
Oil & Gas
Alexander Kornilov, CFA [email protected]
Editorial & Production
788-0334 Christopher Rose
[email protected]
745-7153
(ext. 8238)
Metals & Mining
Translation
Dmitry Glushakov, CFA [email protected]
+7 (499) 681-2918 Anna Martynova
[email protected] 795-3676
Oleg Iuzefovych, CFA
[email protected] +380 (44) 239-9135 Stanislava Ovcharenko [email protected] 783-5020
Equity Sales & Sales Trading (Moscow)
International
Dmitry Matyukhin
[email protected]
+7 (495) 223-5500 223-5522
Domestic Institutional
745-5621 Dmitry Demchenko
[email protected] 783-5115
Vladimir Aleksandrov
[email protected]
Alfa-Direct Sales
Sergey Rybakov
Valeriy Kremnev
+7 (495) 795-3680
ext. 6399
ext. 7083
[email protected]
[email protected]
Alfa Capital Markets (London)
+44 (0) 20 7588-8500
Sales
Sales Trading
Robert Szucsich
[email protected]
7382-4174 Yan Gloukhovski
Alforma Capital Markets (New York)
Sales
Justin Landau
[email protected]
[email protected] 7382-4179
+1 (212) 421-7500
421-8564
Alfa Bank Investor Confidence Index
April 1, 2015: Some Recovery In Sentiment
4