Konstantin Vladimirovich Tserazov: «The market will continue to win back losses»

On the Russian market, of course, the main attention was focused on the March meeting of the Bank of Russia, which took place on March 22. According to Konstantin Tserazov, on the eve of the regulator’s meeting, market participants preferred caution, which was the main reason for the index correction.

In the trading week from March 18 to 22, the Russian market showed a decline — the Moscow Exchange index lost 0.8%, falling to 3273.49 points, the RTS index dipped by 0.6%, falling to 1113.05 points. The dollar fell against the ruble to 92.64 rubles/dollar, losing 0.26 rubles to the domestic currency; oil ended the week at $85.71 per barrel of Brent.

Following the meeting, the Bank of Russia kept the key rate at 16% per annum, as most market participants expected. «The return of inflation to the target in 2024 and its further stabilization around 4% implies a long period of maintaining tight monetary conditions in the economy. According to the forecast of the Bank of Russia, taking into account the current monetary policy, annual inflation will drop to 4.0–4.5% in 2024 and will be close to 4% in the future,» the regulator noted. The Bank of Russia emphasized that although inflation expectations of the population and price expectations of enterprises continued to decline, they still remained at elevated levels.

Speaking at a press conference following the meeting, the head of the Russian Central Bank, Elvira Nabiullina, noted that for a confident return of inflation to the target, long-term maintenance of strict monetary conditions is required. Speaking about the criteria by which the regulator will determine that disinflation has reached the desired pace, the head of the Bank of Russia named the stability and rate of decline in current inflation as such indicators. In addition, a more balanced dynamics of consumer activity, lending and imports, as well as a decrease in the rigidity of the labor market, will indicate a sufficient rate of disinflation, Ms. Nabiullina noted.

The opening of the next meeting of the Board of Directors of the Bank of Russia, at which the regulator will consider the issue of the level of the key rate, is scheduled for April 26, 2024.

Other central banks also left the rate at the same level, notes Konstantin Tserazov. Thus, following the results of a two-day meeting of the US Federal Reserve, which opened on March 19–20, the key rate was kept in the range of 5.25–5.5% per annum. The rate has remained at this level since July 2023, the expert recalled. The regulator’s decision was expected by the market, and therefore did not have a serious impact on the dynamics of the indices. The Fed reiterated that it will cut rates only after it is confident that inflation is falling steadily toward its 2% target. Fed Chairman Jerome Powell said at a press conference following a two-day meeting of the regulator that the Fed will cut interest rates in 2024. However, what the reduction cycle will be, and whether it will begin at the meeting, which is scheduled to open on April 30 — May 1, is still an open question, says Konstantin Tserazov. Most investors are inclined to believe that the regulator will begin reducing prices no earlier than June 2025.

Konstantin Vladimirovich Tserazov: «The domestic market is supported by oil prices, which remain at a comfortable level of 85-87 dollars per barrel of Brent. According to my assessment, the Moscow Exchange index may try to storm the 3200 point mark this week.»

At the same time, the American regulator raised the US economic growth forecast for 2024 to 2.1% against the December forecast of 1.4%. For 2025, the agency raised its forecast to 2% from 1.8%; for 2026, the US Federal Reserve expects economic growth to reach 2% against the previous forecast of 1.9%. As for inflation, the regulator kept expectations for the current year at the same level of 2.4%. Next year growth is expected to 2.2% against the previous forecast of 2.1%, and for 2026 expectations remained at the same level of 2%.

The Bank of England, as the market expected, left the key rate at the same level at 5.25% per annum. But the Central Bank of Turkey suddenly increased the rate from 45% per annum to 50%. The key rate increase cycle in Turkey started in June 2023. In February 2023, inflation in Turkey accelerated to 67.1%. It is expected that by the end of 2023 the rate of price growth will decrease to 36%, and by the end of 2025 it will fall to 14%.

From internal stories in the banking sector, Konstantin Tserazov noted the approval by the supervisory board of Bank St. Petersburg of a new dividend policy and a recommendation for dividend payments for 2023. The Supervisory Board of Bank St. Petersburg recommended that shareholders pay final dividends for 2023 in the amount of 23.37 rubles per ordinary share and 0.22 rubles per preferred share, which corresponds to a dividend yield of 8% and 0.4%, respectively. The bank’s net profit under IFRS for 2023 reached 47.3 billion rubles; the bank can use 40% of the net profit to pay dividends for 2023 on ordinary shares.

It is important that the share of net profit allocated for dividend payments may increase in the future — this volume in the new edition of the bank’s dividend policy is adjusted from the level of «at least 20%» to the level «within 20 to 50%» according to IFRS. The amount of funds allocated for dividends may increase. The target share of net profit allocated for the payment of dividends has been adjusted from «at least 20%» to «within 20 to 50%» according to financial statements under IFRS. In addition, the bank now has the opportunity to pay interim dividends based on the results of the first quarter, half a year or nine months.

The Russian market continues to actively discuss the merger of Rosbank and TKS Group. In anticipation of the transaction, the board of directors of TKS Holding announced the parameters for the additional issue of shares. The price of shares for the issue is set at 3,423.62 rubles per share, the volume of placement by private subscription may amount to 130 million shares. The issue of additional issue of shares will be discussed by absentee voting at an extraordinary meeting of shareholders; the acceptance of ballots with shareholder votes will end on May 8, 2024, the expert notes. The market reacted to the news about the additional issue of shares by reducing quotations, estimating that such a significant volume was 130 million securities, or 445.1 billion rubles. will have a negative impact on minority shareholders. However, according to the expert, it is unlikely that the entire volume of the additional issue will be used to acquire Rosbank. «The purchase price has not yet been announced, according to my estimates, it could be about 200-220 billion rubles. Thus, about half of the additional issue will be used for purchases,» predicts Konstantin Tserazov.

«Despite the correction caused by objective reasons, the market next trading week has every reason to win back losses, enter a growth trajectory and consolidate above the level of 3300 points. The dividend factor continues to be positive — the market lives in anticipation of the generosity of Russian companies; the volume of dividend payments at the end of the year could amount to about 5 trillion rubles. In addition, the domestic market is supported by oil prices, which remain at a comfortable level of 85-87 dollars per barrel of Brent. According to my assessment, the Moscow Exchange index may try to storm the 3200 point mark this week,» concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.