Konstantin Vladimirovich Tserazov: “2018 showed the recovery of Russia’s economic growth”

Interview with Konstantin Tserazov, an investor, economist and ex-deputy head of global markets at Troika Dialog, about how 2018 was on the Russian stock market and what to expect from 2019

Konstantin Vladimirovich Tserazov: “2018 showed the recovery of Russia’s economic growth”.

The Russian market has gone through a difficult year — despite two waves of sanctions, the Moscow Exchange index, nevertheless, showed a decent result. Konstantin Tserazov, an independent expert, economist, ex-deputy head of global markets at Troika Dialog, spoke about what events 2018 was remembered for and what investors should prepare for in 2019.

The confrontation with the West, the trade war between the US and China, the tightening of the US monetary policy have become factors in the outflow of foreign investors from the Russian market. Nevertheless, even in the face of sanctions risks, the Moscow Exchange index at the end of the year showed one of the highest results in the world, the economist emphasized. According to analysts at Otkritie Bank, the Moscow Exchange index added 12.3%, while the RTS index fell 7.42%.

Konstantin Vladimirovich Tserazov: “It is logical that oil and gas companies became the leaders of the year”

Having started the year with optimistic growth, the market has experienced two waves of sanctions. In April, the market was shattered by the US decision to impose sanctions against Russian businessmen and officials; the Moscow Exchange index collapsed by 8.3% in a day. However, by the end of April, the index won back losses. In August, the US imposed restrictions on the purchase of Russian government debt and the supply of dual-use equipment from the US. However, the market calmly accepted the new restrictions, believing that they were already priced in, and reacted weakly to the increased sanctions pressure, Konstantin Tserazov notes.

The main growth driver was oil prices, which in October crossed the level of $85 per barrel of Brent amid production cuts by OPEC+ countries, Venezuela's exit from the market and expected sanctions against Iran. It is logical that the leaders of the year were companies in the oil and gas sector - according to analysts at FC Otkritie Bank, the shares of NOVATEK rose by 65%, Tatneft - by 58%, LUKOIL - by 43%, Rosneft - by 40%, explains Konstantin Tserazov.

Agreeing with Otkritie Bank analysts that the Russian market is still largely dependent on oil prices, Konstantin Tserazov points out that 2018 showed a recovery in Russia's economic growth - for the first time the budget became a surplus, the Bank of Russia is successfully fighting inflation. The Russian market, with one of the highest dividend yields in the world, is still heavily oversold. With favorable market conditions, 2019 could become the most successful year for the Russian market,” Konstantin Tserazov concludes.

*the original text in Russian is here