Weekly Report Russia

Transcription

1 Trading Desks Dealing code: OTPH Live quotes at OTP BLOOMBERG page Head of Treasury Andrey Drushlyakov (2854) Weekly Report Russia 4 June 2013 Fixed Income Desk Sergey Fedorov (2854) s.fedorov@otpbank.ru Alexander Zhuliaev (2798) a.zhuliaev@otpbank.ru Andrey Dunaev (2637) a.dunaev@otpbank.ru FX / Money Market Desk Alexander Laktionov (2690) a.laktionov@otpbank.ru Andrey Gavrilov (2902) a.gavrilov@otpbank.ru Igor Khovanskiy (2896) i.khovanskiy@otpbank.ru Sales Desk Arsen Manukyan (2691) a.manukyan@otpbank.ru Maxim Ardatov ( 2587) m.ardatov@otpbank.ru Alexander Tarasov (2843) al.tarasov@otpbank.ru

2 WEEKLY REPORT RUSSIA Macroeconomics: mixed dynamics (Page 3) There was some slowdown in retail sales growth in April, due to weaker sales in food categories that rose only by 1.6% YoY. At the same time, non-food sales advanced by 6.2%. Unemployment declined to 5.6%, but after seasonal adjustment it was slightly up. Investments continued to be a weak point in economic activity, as they contracted by 0.7% YoY after the 0.8% YoY decline in the previous month. FX market: ruble loses some ground (Page 4) The ruble declined by 1.4% versus the dollar and by 2.6% against the euro over the previous week, with most of the negative movement coming during the second part of the week. As a result, the ruble declined to 32 rubles per dollar, the lowest level since August The ruble basket rose to level and the CBR was forced to make FX interventions to support the ruble for the first time since the end of April. Bond markets: under negative pressure (Page 5-6) Local bond market was under significant pressure over the previous week, with government bond yields rising by bp across the curve. The Ministry of Finance was forced to cancel two out of three OFZ auctions in recent weeks due to weak demand. Money markets: tight liquidity conditions (Page 7) Despite the end of tax payment period, liquidity conditions remained tight, with shortterm rates staying close to the 6.5% level. We expect that the situation will remain unchanged until the CBR decides to cut the main interest rates in July or August. Equity markets: back to the local minimum (Page 8) Russia s equity market lost almost 2-4% over the previous week and 8% from its maximum on 22 May. Global investors withdrew almost USD 2.9 bn from funds that invest in emerging markets and USD 80 mn from funds dedicated to Russia Chief Economist Gergely Tardos tardosg@otpbank.hu FX/FI Strategist Levente Pápa papal@otpbank.hu Macro Analysts Gábor Dunai dunaig@otpbank.hu Győző Eppich eppichgyo@otpbank.hu Szilárd Kondora kondorasz@otpbank.hu Bálint Szaniszló szaniszlob@otpbank.hu Mihaela Neagu mihaela.neagu@otpbank.ro Rodion Lomivorotov CFA (2761) r.lomivorotov@otpbank.ru Sector Analyst Piroska Szabó szabopb@otpbank.hu Technical Analyst András Salamon salamona@otpbank.hu 2

3 WEEKLY REPORT RUSSIA Russian economy: some deceleration in retail sales PERIOD INDICATOR FACT CONSENSUS PREVIOUS REVISION 24 May APR Disposable Income, % YoY 7.3% 6.5% 8.3% 24 May APR Real Wages, % YoY 4.2% 4.1% 4.2% 5.1% 24 May APR Retail Sales, % YoY 4.1% 4.5% 4.4% 24 May APR Unemployment Rate, % 5.6% 5.5% 5.7% 24 May APR Investments, % YoY -0.7% 2.0% -0.8% 24 May 1Q Foreign Direct Investment, YTD USD 6.3 bn - USD 18.6 bn 24 May 1Q Russia Foreign Direct Investm. 63.2% May MAY Weekly CPI % YTD 3.0% - 2.8% 30 May MAY Gold & Forex Reserve USD USD bn - USD bn 31 May MAY Money Supply RUB 7.69 trl - RUB 7.70 trl 03 June MAY Manufacturing PMI June MAY Wellbeing Fund USD 86.7 bn - USD 87.3 bn 03 June MAY Reserve Fund USD 84.4 bn - USD 84.9 bn Source: Bloomberg Retail sales growth slightly decelerated in April, as the year-onyear figure rose by 4.1% compared with 4.4% YoY growth in March. The steepest decline was in food categories, as growth slowed down to 1.6% YoY from 2.6% YoY in March. At the same time, there was some improvement in non-food sales, as they rose by 6.2% YoY compared with 5.7% YoY in the previous month. However, this positive dynamics in non-food sales somewhat contradicts to statistics on weak car sales, which declined by 8% YoY in April. Some deceleration may be partly explained by the weaker growth of disposable income, as it added 7.3% YoY after the 8.3% YoY rise in March. Real wages added 4.2% YoY and previous month s figures were revised upward to 5.1% YoY. Unemployment rate declined to 5.6% in April from 5.7% a month earlier but taking into account seasonal adjustment, unemployment was slightly up. Investment activity remained muted in April, with the year-on-year figure declining by 0.7%, after 0.8% YoY decline in March and sluggish growth in February. We expect that there may be some stabilization in investment activity in the following months, with some improvement in Q3. Meanwhile there is some continuing slackness in real economic activity, as manufacturing PMI continued to decline in May, for the third month in a row. The index declined to 50.4 in May from 50.6 in April, indicating further weakness of economic activity. Weekly inflation rose by 0.2% over the period ending on May 27. As a result, the year-on-year figure stayed at 7.35% level, even higher than in February. The price growth was caused by higher food prices, particularly fruits and increase in some tariffs, including healthcare and tourism. We argued in our recent report that inflation has reached its maximum in April and will slow down in the following months but it is clearer now that the decline in inflation will become more pronounced at the beginning of July. Real income and wages, monthly %YoY Source: Bloomberg, OTP Research Inflation dynamics % YoY, weekly Source: Bloomberg, OTP Research 3

4 WEEKLY REPORT RUSSIA FX market: ruble is under pressure The ruble declined by 1.4% against the dollar and by 2.6% to the euro over the previous week, with most of the negative movement coming during the second part of the week. As a result, the ruble declined to 32 rubles per dollar, the lowest level since August Other EM and commodity currencies were also under pressure, as the CAD lost 0.6%, the AUD was down by 0.8%, the TRY lost 1.5%, the MXN contracted by 2.1%, the BRL dropped 4.2% and ZAR fell 5.1%. There were several factors that pushed the ruble lower, including the end of the tax payment period, which usually provides some support for the ruble; investors were frightened by the prospect that the Fed may start to reduce its QE programme soon as the economic situation improves; higher interest rates will make risk assets less attractive, particularly in emerging markets. The ruble basket moved to level on Friday and the CBR was forced to sell USD 130 nm to support the ruble on Thursday and Friday. There was significant movement in the cross-currency interest rate curve (RUB/USD 3M Libor) during the previous week, with the 5Y implied rate moving upward by almost 60 bp. It is likely that this movement was also caused by investors fears about the end of QE and increase in core interest rates. As a result, XCCY rates moved up across many emerging markets, with the strongest increase in Turkey, which is likely the most vulnerable economy to foreign capital outflow Implied yield dynamics FX RATES Close Weekly chg. (%) YTD chg. (%) USD/RUB EUR/RUB Ruble basket RUB/HUF RUB/UAH RUB/KZT EUR/USD COMMODITY CURRENCIES USD/NOK NZD/USD AUD/USD USD/CAD EM CURRENCIES USD/ZAR USD/TRY USD/BRL FX SWAP YIELD Close Weekly chg. (bp) YTD chg. (bp) 1M USD/RUB M USD/RUB M USD/RUB Y USD/RUB FX OPTIONS 1M ATM vol Source: Bloomberg EM and commodity FX rates dynamics ( =100) Sources: CBR, OTP Research Sources: Bloomberg, OTP Research Developed countries FX rates dynamics ( =100) Sources: Reuters, OTP Research 4

5 WEEKLY REPORT RUSSIA Bond market: negative dynamics Russia s bond market was under heavy pressure over the previous week, due to negative global market conditions and rising fears about the end of QE in the USA. As a result, government bond yields rose by bp over the curve and it is likely that the pressure will continue for some time. OFZ yield curve (% YTM) GOVERNMENT SECURITIES YTM% Weekly chg. (bp) YTD chg. (bp) 1Y Y Y Y Y Y Y EUROBONDS Russia Russia Russia Russia Russia Russia Russia Russia Gazprom Sberbank Lukoil CDS SPREADS Value (bp) Weekly chg. (bp) YTD chg. (bp) Russia CDS 3Y Russia CDS 5Y Sberbank CDS 5Y OFZ yields dynamics (%) Source: Bloomberg, OTP Research Sources: Bloomberg CDS spread dynamics (bps) Sources: Bloomberg 5

6 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 WEEKLY REPORT RUSSIA Government securities: primary market The Ministry of Finance decided to cancel OFZ auction during this week, as the negative market environment will probably lead to higher yields and lower demand. Previously, two auctions were also unsuccessful as the MinFin cancelled the first one and demand during the second one reached only RUB 0.9 bn. Primary market volumes, RUB bn New OFZ bonds, RUB bn New corporate bonds, RUB bn Source: MinFin, OTP Research Previous auctions results AUCTION DATE MATURITY ISSUE ISSUE SIZE, RUB bn DEMAND, RUB bn PLACED, RUB bn RATIO AVERAGE YIELD GUIDANCE RATE years % % years % % years % years % % canceled Source: CBR, MinFin MinFin issue plan for Q AUCTION DATE MATURITY ISSUE SIZE ACTUAL years RUB 10 bn RUB 10 bn years RUB 20 bn RUB 7.6 bn years RUB 10 bn RUB 10 bn April years RUB 25 bn RUB 25 bn years RUB 20 bn RUB 20 bn years RUB 10 bn RUB 10 bn years RUB 20 bn RUB 20 bn years RUB 20 bn RUB 20 bn years RUB 30 bn RUB 29.2 bn May years RUB 10 bn RUB 10 bn years RUB 33.6 bn canceled years RUB 20 bn RUB 0.9 bn canceled June Total RUB 300 bn RUB bn Source: MinFin 6

7 WEEKLY REPORT RUSSIA MM: Tight liquidity conditions Liquidity situation remains tight even after the end of tax payment period, as banks increased borrowing from the CBR and the MinFin. As a result, shortterm rates stayed close to 6.5% and we do not expect that there will be any decline soon, before the CBR starts to cut main interest rates. As inflation rose to 7.3% YoY at the end of May, it is unlikely that the CBR will start monetary easing in June. We expect that inflation will start to decline in July and the regulator will gain more room for manoeuvre. Banks also significantly increased the amount of borrowing from the CBR through FX swap operation at 6.5% rate. At the same time, fixed-price REPO operation is less sought by banks. Money market rates dynamics (%) BANKING LIQUIDITY Bln RUB Weekly chg. YTD chg. Accounts in CBR Deposits in CBR REPO with CBR 2, MinFin Deposits Net liquidity -1, MONEY MARKET Rate (%) Weekly chg. (bp) YTD chg. (bp) Ruonia Mosprime ON Auction one-day REPO Refinance rate Fixed one-day REPO Deposit rate Liquidity position with CBR (RUB bn) Source: CBR, Bloomberg, OTP Research MinFin deposits at commercial banks (RUB bn) Source: CBR, Bloomberg, OTP Research Source: CBR, OTP Research Main sources of liquidity (weekly flow, RUB bn) Source: MinFin, Bloomberg, OTP Research 7

8 WEEKLY REPORT RUSSIA Asset markets: negative correction Russian equity indices lost % over the previous week, demonstrating the worst performance compared with other markets. The S&P 500 was down by 1.1% and MSCI Europe declined by 0.9%. Investors were frightened by the prospect that the Fed may start to reduce its QE programme soon as the economic situation improves; higher interest rates will make risk assets less attractive, particularly in emerging markets. Commodities were also under pressure, as the GSCI Commodity index lost 1.4% over the week; the price of Brent oil declined by 2.2%, closing at 100 dollars per barrel. International investors withdrew almost USD 2.9 bn from EM funds and USD 80 mn from funds that invest in Russia.. Main equity indices and Brent price ( = 100) STOCK EXCHANGE Close Weekly chg. (%) YTD chg. (%) MICEX 1, RTS 1, DOW 15, S&P 500 1, FTSE 6, DAX 8, Hong Kong 22, MSCI Europe MSCI Asia MSCI EM 1, COMMODITIES Brent WTI Urals Gold 1, GSCI Commodity Source: Bloomberg Global assets' performance (%) Source: Bloomberg Source: Bloomberg, OTP Research. 8

9 WEEKLY REPORT RUSSIA Disclaimer OTP Bank Plc. does not intend to present this document as an objective or independent explanation of the matters contained therein. This document a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. This communication does not contain a comprehensive analysis of the described issues. This material is only for information purposes and it is not intended as an investment advice, an offer or solicitation for the purchase or sale of any financial instrument, and it does not constitute legal, tax or accounting advice. Information herein reflects current market practices. Additional information may be available on request. This document is being submitted to selected recipients only. It is provided on the basis that it may not be reproduced, in whole or in part, to any other person without the prior written permission of OTP Bank. Although the information in this document has been prepared in good faith from sources which OTP Bank believes to be reliable, we do not represent or warrant its accuracy and such information may be incomplete or condensed. Opinions and estimates constitute our judgment and are subject to change without notice. OTP Bank may hold a position or act as market maker in the financial instrument of any issuer discussed herein or act as advisor or lender to such issuer. This document is not intended to provide the basis for any evaluation of the financial instruments discussed herein. In particular, information in this document regarding any issue of new financial instruments should be regarded as indicative, preliminary and for illustrative purposes only, and evaluation of any such financial instruments should be made solely on the basis of information contained in the relevant offering circular and pricing supplement when available. OTP Bank does not act as a fiduciary for or an advisor to any prospective purchaser of the financial instruments discussed herein and is not responsible for determining the legality or suitability of an investment in the financial instruments by any prospective purchaser. Before purchasing or selling financial instruments or engaging investment services, please examine the prospectuses, regulations, terms, agreements, notices, fee letters, and any other relevant documents regarding financial instruments or investment services described herein in order to be capable of making a well-advised investment decision. Please refer to your competent adviser for advice on the risks, fees, taxes, potential losses and any other relevant conditions before you make your investment decision regarding financial instruments or investment services described herein. OTP Bank Plc. in compliance with the applicable law, assumes no responsibility, obligation, warranty or guarantee whatsoever for any direct or indirect damage (including losses arising from investments), or for the costs or expenses, detrimental legal consequences or other sanctions (including punitive and consequential damage) sustained by any natural or legal person as a result of the purchase or sale of financial instruments or engaging investment services described herein, even if OTP Bank Plc. was warned of the possibility of such occurrences. Figures described herein refer to the past and past performance is not a reliable indicator of future results. All rights reserved OTP Bank Plc. (registered seat: Nádor utca 16., Budapest H-1051, Hungary; company registration number: ; authorized by the Hungarian Financial Supervisory Authority; for further information please refer to: This document has been provided to the recipients upon their prior request. Your abovementioned permission may be withdrawn by an addressed to elemzes@otpbank.hu or a written mail addressed to "Research Center Hungary 1051, Budapest Nádor utca. 21. Please refer to your name and address in both cases. 9