Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 15 Feb 2024 by Evgeny Gavrilenkov

---

Investors are waiting for a new sanctions package - to be announced on Feb 24. There are no indications that it will target the financial sector, but this scenario cannot be ruled out. The ruble weakened in anticipation of this event but remains more or less stable. Financial markets, in general, remain calm. Minfin continues to place new bonds, while the demand is moderate, but it is suitable for the government to fulfill its borrowing program. Some new primary deals were signed on the equity market - some with very good oversubscription. Private (individual) investors dominate there - keen to allocate some of their savings into shares despite interest rates on retail deposits being high. Once interest rates start moving down, the demand for equities will strengthen. The main event of the week is the upcoming meeting of the CBR’s Board of Directors this Friday. Given a relatively stable situation with inflation (which still remains elevated), there is almost a 100% chance for the key rate to stay unchanged. Nevertheless, the market is waiting for the comments from the regulator to get some hints on when it may start the rate-cut cycle. The CBR officials mentioned last week that it could happen not earlier than in 2H24, but investors hope for a more optimistic scenario. Most likely, the key rate will remain double-digit this year. Hence, short-term money market instruments will remain attractive. In this environment, the appetite for investments in the real sector may be limited, which will trim the growth rate of investments in production capacity. In the seven days ending on February 12, inflation w-o-w reached 0.21%. The MTD and YTD inflation prints on that day move...