Investors played up – Newspaper Kommersant No. 202 (7403) of 10/31/2022
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World stock markets closed last week on a positive note, the indices returned to the values of two or three months ago. The growth of the US economy and the positive reporting of a number of corporations gave reason to increase investment in risky assets. The Russian market was no exception, which, however, is growing more due to internal factors. But experts expect a rise in rates from financial regulators in the near future, which is not conducive to further large-scale bullish play.
According to Investing.com, the leading European and American indices reached mid-September levels by the end of the week, while the DJIA returned to mid-August levels. Thus, stock indicators won back the fall of late September – early October, adding 4-6% over the week. The Moscow Exchange Index closed at its highest level since September 23 with an increase of over 6%.
According to Maria Trofimova, an analyst at TRINFICO Management Company, the key factor that influenced the market was the publication of quarterly data on US GDP. According to preliminary data, in the third quarter growth was 2.6%, while analysts had expected 2.4%. At the same time, GDP fell by 0.6% in the second quarter. According to the analyst, the dynamics suggests that “there is a recovery in the economy and the risk of a recessionary scenario in the country is decreasing.”
The data of Emerging Portfolio Funds Research (EPFR) also speaks about the positive mood of investors. Over the week, total inflows into equity funds reached $23 billion, the highest since March of this year. Moreover, the inflow into equity funds of developing countries amounted to $ 2.8 billion – a record since April. Analysts at Arikacapital note that the influx into equity funds occurred “after a long break and outflows of hundreds of billions of dollars, so the picture has not changed much.” That said, as recession risks rise, “the overall sentiment remains more bearish.”
In the near future, investors’ attention will be focused on corporate reporting and statements by representatives of central banks. In particular, next week the next Fed rate hike is expected by 0.75 percentage points, up to 3.75-4%. The Bank of England is also expected to raise the rate by 0.75 percentage points. At the same time, the European Central Bank last week already increased its key rate by 0.75 percentage points to 2%. It is planned to raise rates at the next meetings. The head of the ECB, Christine Lagarde, noted that in the third quarter, economic activity in the eurozone slowed down, and recession risks increased.
Rate growth plans suggest that there is no victory over inflation yet, market participants note. “This may become a trigger for new sales in the stock markets,” Arikacapital notes. At the same time, Maria Trofimova believes that US Treasury yields are near highs, which contributes to a global increase in risky investments in the stock market, as well as in anticipation of Fed policy easing in the second half of 2023.
Despite the almost simultaneous growth of world markets, the Russian one remains largely isolated. Global factors, according to Vitaly Isakov, investment director at Otkritie Management Company, have almost ceased to influence him in the short term. Of the local reasons, the main role was played by the change in supply and demand for securities. The market grew because the number of participants who wanted to sell “at any price” decreased, which usually happens at the moment of emotional anguish, he notes, and “when the emotions of the alarmists dried up”, quotes went up.
Next week, the main impact on the Russian market will be the ongoing reinvestment of dividends, Maria Trofimova believes. Thus, Gazprom began paying record dividends. In terms of free-float, they are estimated at 600 billion rubles, and revenues to the market – at 200-350 billion rubles. (see Kommersant of October 26). At the same time, the daily trading volume of shares last week was only 40-45 billion rubles.
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