MOSCOW (Reuters) - Russia’s stock market will post small gains by the end of this year in the absence of more Western sanctions, but the theme of penalties and global trade conflict are likely to dominate the mood next year, a Reuters poll found.
Russian financial markets have proved vulnerable to U.S. sanctions and threats of more curbs to punish Moscow for what Washington calls “malign activities.”
Polled by Reuters before the latest tensions between Russia and Ukraine, analysts saw some upside for the Russian market, arguing that the inevitability of more sanctions being imposed this year had faded.
The rouble-based MOEX stock index .IMOEX is seen ending this year at 2,440 points, according to the median forecast of eight analysts polled by Reuters.
That is almost six percent above Monday’s close of 2,308.5, and closer to the upper boundary of the forecast range of 2,250 to 2,480 points. It is also above the year-end level of 2,230 predicted in the previous quarterly stock poll.
“We expect a slow rise, a New Year mini-rally,” said Dmitry Alexandrov, an analyst at Univer Capital.
“The main risks are an inability of OPEC-plus allies to reach a deal at the Dec. 6 meeting and a further drop in Brent crude prices to $50 per barrel,” said Alexandrov.
OPEC meets in Vienna on Dec. 6 to discuss output policy together with some non-OPEC producers, including Russia.
Brent crude futures, a benchmark for Russia’s key exports, have fallen around 20 percent since the previous Reuters stocks poll in late August LCOc1.
A summit of 20 members of the group of industrialized nations due in Argentina later this week is also in focus. U.S. President Donald Trump and his Chinese counterpart Xi Jinping are set to meet there and are likely to discuss global trade.
The trade war may continue, which will put pressure on the global economy, said Viktor Veselov, an analyst at Globex Bank.
“This is the key theme for the rest of 2018,” he said.
The dollar-based RTS index .IRTS was predicted at 1,160 points by the end of this year, the poll showed, with forecasts ranging from 1,050 to 1,215. RTS closed Monday at 1,084.
Looking forward, analysts warn next year may bring respite to the market, given Russian economic growth is expected to slow to 1.2-1.7 percent in 2019 from 1.5-2.0 percent expected this year, according to the central bank’s forecast.
“It is better to focus on companies’ shares that offer nice dividend yields and are less vulnerable to risks of a cooldown in the global economy and commodity markets, that can also partly hedge risks of a further rouble weakening,” said Eugeny Loktyukhov, an analyst at Promsvyazbank.
Among such companies Loktykhov mentioned are giant Gazprom (GAZP.MM), diamond maker Alrosa (ALRS.MM) and shares in largest lenders Sberbank (SBER.MM) and VTB (VTBR.MM) that look undervalued compared with their global peers.
Since the analysts were consulted, several European politicians have raised the possibility of sanctions over Russia’s capturing of three Ukrainian vessels, a move the West fears could ignite a wider conflict.
Writing by Andrey Ostroukh, Editing by William Maclean