Russia stocks rally seen peaking in mid-2020 before paring gains

The Russian stock market has reached record highs this year but still has room to climb further in coming months before paring gains towards the end of 2020, a Reuters poll of market experts found.

The market has ridden the wave of a global upturn and outperformed its emerging market peers this year as investors snapped up high-dividend Russian equities as fears have faded of imminent new Western sanctions against Moscow.

The rouble-based MOEX index has reached an all-time high of 3,009.1 in November, taking its year-to-date gain to over 25%, and is seen finishing this year at 3,000.

The MOEX is seen climbing higher to 3,058 by the middle of 2020 before sliding to 2,785 by end-2020, according to the poll of 12 market experts conducted in the second half of November.

Forecasts for the end-2020 MOEX reading ranged between 2,450 and 3,300 as analysts priced in downside risks stemming from global trade tensions, particularly the US-China trade war, and upside risks from the easier monetary policies of major central banks.

"The global macro backdrop is the single most important factor for all equity markets, including Russia," said Slava Smolyaninov, chief strategist at BCS Global Markets.

The so-called bull run in global stocks that buoyed the Russian stock market is likely to last for several months or even up to a year, the poll showed.

"There is a big chance that US President Donald Trump will keep fiscal stimulus on and could possibly make a deal with China (before the) approaching US presidential election," said Vladimir Miklashevsky, senior economist and trading desk strategist at Danske Bank.

Alexander Osin, an analyst at Freedom Finance, said even though risks were skewed more to the downside, lower rates globally and extra liquidity were seen supporting bullish sentiment.

The Russian stock market could also see inflows of funds from Russian bond investors whose strategy was to buy fixed-income tools while the country's central bank was cutting rates, which drove bonds prices higher.

As room for further cuts becomes narrower after the central bank brought its key rate into the middle of its neutral range of 6-7%, some bond investors may look for buying opportunities elsewhere.

The dollar-based RTS index is forecast to trade at 1,500 points by the end of this year, versus Monday's close of 1,454.63.

It is seen staying at 1,500 up to the middle of 2020 and sliding to 1,425 by the end of 2020. Forecasts for end-2020 ranged from 1,000 to 1,750 in the poll.