Market
April was another great month for Russian equities and ruble as oil prices climbed on hopes that global market will reach balance sooner than later. RTS index added 8.5% in a month and recorded about 25% YTD in US Dollar terms and well outpaced MSCI EM (+6.5%). Oil prices approached $50 per barrel level even after failure of freeze agreement between OPEC and non-OPEC countries. Ruble was strong in April and appreciated against US Dollar another 3.5% and more than 10% YTD. That’s why Micex index April performance was not so great in ruble terms – “only” about 4%.
The best performing sector of April was again steels as iron ore prices in China showed another great move up. Second story of the month was Utilities were I steel saw some speculative buyers in light of potential huge dividends payments (especially FSK case. +22% in April).
In the second half of the month Russian market had a big sharp move up after government decree on dividends rules for state companies that’s ordered to pay 50% of net income under IFRS. The main beneficiary of this decree is off course Gazprom shareholders with potential yield about 15%.
But as it usually happens in Russia, investor’s fairytale was not became true – Gazprom reached agreement with the State to pay much more less than initially planned.
Consumer sector continued to underperformed against broad market even in case of ruble appreciation – I think that the main point of sector weakness was low consumer confidence.
Portfolio performance
In April portfolio lagged to benchmark again – Fund lost about 0.1% versus Micex gained 4.4%. In 1Q portfolio added 4.8 % versus 10.2 % of Micex. The main source of underperformance YTD is Norilsk Nickel, Magnit and off course E.On.
The best performers in last month was NLMK (thanks for steel prices rally) and Sberbank preferred shares on strong performance of ordinary shares as oil prices raised and ruble appreciated.
I made a number of substitutions in my portfolio. The key change was switch from Magnit into Dixy – I was completely disappointed with financial performance of the company especially after weak operational data.
Second point was Norilsk Nickel eliminated after new dividend policy announcement which means much more lower floor for dividend payments than last couple of years.
And the last change in my portfolio in April was reverse switch from Bashneft ords back to prefs with pretty discount about 30%.
Prospects
The whole portfolio is currently trading at a P/E multiplier of 9.0Х and 6.0Х for the current year and next year respectively.
I prefer to stick to the current portfolio structure, but am always looking for new ideas.