Russian shares will rise nearly 10 percent by the end of 2015, the median forecast in a Reuters survey showed, but analysts said oil price falls and bad news out of China could easily derail any upward momentum. The dollar-denominated RTS share index started the year in bullish form, racking up gains of almost 40 percent by mid-May, but has sunk since and is now trading 2 percent lower than last year's close.
Some analysts say stocks will be supported from here by low valuations and less pessimistic news on the Russian economy, while others are pinning their hopes on oil prices having finally found a floor. "We see the Russian market trading range-bound until the end of the year, with the upside limited to 10 to 15 percent," said Erik DePoy, equities strategist at Gazprombank.
"The market is heavily under-owned." The median forecast from 10 analysts, surveyed in the past week, showed the RTS would end 2015 at 850 points. That was more negative than in the previous Reuters poll in June, when analysts had forecast the index would be at 944 points at the end of December. The RTS closed at 775.73 points on Monday.
Danske Bank trading strategist Vladimir Miklashevsky said he had cut his forecast because of expected rouble weakness, emerging-market jitters over a slowdown in China's economy and the prospect the US central bank will soon raise rates for the first time in almost a decade. "We consider the current geopolitical environment with Western sanctions to be a new status quo and continue over 2016," he said. Last year the RTS lost around 45 percent of its value as oil and the rouble both tanked, while Western sanctions over the Ukraine conflict scared away many conservative investors.
Oil and gas companies have a weighting of around 50 percent in the RTS, hence energy prices are a key determinant of its fortunes, while a weaker rouble makes dollar-denominated stocks more expensive for Russian investors. Raiffeisenbank's Sofya Kirsanova said her top picks were export-oriented companies that would probably pay healthy dividends next year because of the weaker rouble, and domestic retailers, which are benefiting from Russian restrictions on Western food imports. Analysts' year-end forecasts for the RTS ranged from 725 to 1,050 points, reflecting considerable uncertainty as to what the next three months hold. DePoy said: "There's the sanctions issue, rouble volatility and the oil price. It seems wherever you look there's something pressing on Russia."
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