Room for Russian stocks to outperform with first coronavirus vaccine

Russian stocks might have just gained an edge in global markets after Russia approved the world’s first COVID-19 vaccine.


The first vaccine, falling COVID cases, a surge in new Russian brokerage accounts and stable oil prices are all reasons to think Russian shares can begin to outperform.


“This morning, for the first time in the world, a vaccine against the new coronavirus was registered.” - Vladimir Putin (August 11, 2020)

 

Russian president Putin said one of his daughters had taken the vaccine; demonstrating his faith in its safety and efficiency. Russian health authorities have stated medical workers, teachers and other risk groups will be the first to receive the vaccine.

 

Russian shares

Russia’s stock market had the one-two punch of the pandemic and an oil price crash this year, but shares have been on the rise since. In 2019 the MOEX index (formerly MICEX) was a top global performer.

Russia registering the first approved COVID-19 vaccine is one reason to expect a return to form from the Russian stock market.


Chart: S&P 500 vs. MOEX (year-to-date)Chart: S&P 500 vs. MOEX (year-to-date) vs 

The MOEX has tracked underneath the S&P 500 since stock markets bottomed in March.

 

COVID cases

Coronavirus cases in Russia have been gradually declining to just above 5000 per day.

russia covid cases august

Russian Robinhoods

At the end of July, the number of individuals with a brokerage account on Moscow Exchange reached 5.65 million and 1.8 million people have opened brokerage accounts year-to-date. (source: MOEX)


new russia brokerage accounts 2020
Source: Moscow Exchange (MOEX) - July, 2020

 

Oil stabilised

Brent crude is still down by a hefty 30% on the year but is up over 50% in the last three months, helping along the 14% rise in Russian shares, where there is a massive weighting towards energy.

 

Chart: MOEX vs. Brent crude oil (3-months)
Chart: MOEX vs. Brent crude oil (3-months)

Russia micex index sector breakdown

 

How to play it


US ADRs
Mechel Steel (MTL) - NYSE - Metals & Mining
Mobile Telesystems (MBT) - NYSE - Mobile Telecom
QIWI (QIWI) - NASDAQ - Financial Services

Russia ETFs:
Market Vectors Russia ETF (RSX)
Direxion Daily Russia Bull 3X ETF (RUSL)
iShares MSCI Russia Capped Index Fund (ERUS)
Market Vectors Russia Small-Cap ETF (RSXJ)
Direxion Daily Russia Bear 3x Shares ETF (RUSS)
SPDR S&P Russia ETF (RBL)

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