Managers are refueling – Newspaper Kommersant No. 212 (7413) dated 11/16/2022

International portfolio managers are concerned about the high rates of inflation in the world, as it forces central banks to maintain an aggressive monetary policy. However, market participants expect that the Fed will reduce the rate of increase in the key rate. Against this backdrop, managers continue to keep a high proportion of cash in their portfolios, and the oil and gas sector companies benefiting from rising fuel prices are choosing on the stock market.

A November survey of portfolio managers by Bank of America (BofA) analysts indicates a marked increase in investors’ inflationary fears. According to the survey, the number of respondents who said that inflation is a key risk with unpredictable consequences for the economy was 32%, up 5 p.p. higher than in October. Under such conditions, the number of managers who do not rule out a recession in 2023 is 73% higher than the number of those who do not expect it.

The growth of fears is connected with the stability of inflation and the reaction of financial regulators, analysts say. According to the Organization for Economic Co-operation and Development (OECD), in September, consumer prices in OECD countries rose by 10.5% in annual terms, exceeding by 0.2 percentage points. August indicator. Inflation in the G7 countries accelerated to 7.7% from 7.5% in August. In the US inflation in September slowed down from 8.3% to 8.2%, in France – from 5.9% to 5.6%. However, in Germany, price growth accelerated from 7.9% to 10%, in the UK – from 8.6% to 8.8%.

“The stability of inflation is the key to keeping key rates at an elevated level for a long time, which is the main risk for the global economy and financial stability and, as a result, risky assets,” says Dmitry Polevoy, investment director at Loko-Invest Asset Management.

According to a BofA survey, the Fed will not reach the peak 5% rate until the second quarter of 2023. This suggests that market participants expect a slowdown in the rates of rate hike, which is at the level of 3.75-4% in November. Under such circumstances, fund managers adjusted the proportion of cash in their portfolios. It dropped from 6.3% to 6.2% over the month, but remains well above the long-term average of 4.9%, according to the BofA survey. At the same time, a significant proportion of managers are still not ready to increase investments in shares in the current conditions. The number of portfolios in which such investments were below the indicative level was 34% higher than the number of those in which this share was higher. At the same time, the indicator fell by 15 p.p. over the month.

Although there is still a shortage of shares in portfolios, in recent weeks, purchases of this asset have consistently exceeded sales. According to Emerging Portfolio Funds Research (EPFR), for the three weeks ended November 9, the total inflow into equity funds amounted to $27 billion. According to Sergey Belyaev, managing director of the investment department of UFG Wealth Management, a high share of cash from long-term investors gradually began to come into the market . Investors may be attracted by the levels at which the stock markets are located.

At the same time, managers are changing their industry preferences, reducing investments in shares of high-tech companies and increasing investments in securities of oil and gas companies. As a result, the share of technology stocks remains below the indicative level by 19%, the lowest level since August 2006 August. At the same time, the share of shares of fuel and energy companies exceeded the indicative level by 22%, having added 1 percentage point over the month. and approaching the highs of a decade ago.

“The oil and gas sector is among the leaders due to the price situation and expectations that high prices will continue,” says Viktor Shastin, head of the investment consulting department of Veles Capital investment company.

At the same time, the influence of external factors on the Russian market is limited, including due to the ongoing blocking of the Euroclear-NSD interdepository bridge. For the month ended November 15, the Moscow Oil and Gas Exchange index rose 12%, while the broad market index rose more than 15%. “The inability of local investors to fully invest in the global market and significant restrictions for global investors do not allow capital to flow freely between markets,” Sergey Belyaev notes. According to him, until the inter-depository bridge is restored, the effect of global macroeconomic shifts, both positive and negative, is unlikely to be fully visible.

Vitaly Gaidaev