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The indicator for the investor themes of the day 15.11.2017 at 21:00

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Investors ' Attention this week was focused on another revision of index MSCI Russia. It included the shares of the MMK and "Pole", and of paper AFK "System" and "Rostelecom", on the contrary, was eliminated. Why is it important to monitor your stocks? And whether or not to make a decision based on their changes?

the Growth of the MSCI

Stock company "the pole" since the beginning of the week rose nearly 3%, hitting a new historical high. At the peak value Tuesday ,November 14, the company's securities on the Moscow exchange traded at 5 209 rubles. Highs updated and shares of the Magnitogorsk metallurgical combine (MMK): on Tuesday the quotes have reached 47.33 ruble, rising in price by 3.1%. However, the next day and "pole", and the CMI have completed the trading session with a "minus".

the Driver of growth of quotations of both companies at the beginning of the week was their inclusion in settlement base of index MSCI Russia and EM Standard. The decision was taken by the index provider MSCI. It will enter into force on 1 December. The freely tradable volume of securities (free float) MMK exceeded 15% after the sale of shares in the metallurgical plant structure of its main beneficiary, Viktor Rashnikov, and the market momentum, "Pole" has increased, after in June the company conducted an SPO.

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This has caused additional inflow of investors ' money in the shares of both companies. According to analysts at investment Bank Sberbank CIB Cole Aksana and Andrey Kuznetsov, the inflow of capital to MMK exchange of funds could reach 32 million dollars. This, as indicated in the review of the investment Bank, more than three times the average daily trading volume of the shares for the previous 30 trading sessions. Capital inflows in stocks "Poles" analysts valued at 41 million dollars.

In "VTB the Capital" expect the influx of the shares of the MMK at 144 million dollars, and in the paper "Poles" — 186 million dollars. According to the analyst of "KIT Finance Broker" Anna Ustinova, the inclusion of CMI in the MSCI index is a positive signal. For those investors who hold securities in the portfolio, she recommends locking position upon the entry of changes into force, i.e. until 30 November.

Large and popular

In the MSCI Russia index on October 30, there were 22 Russian companies, which accounted for 85% of capitalization of the domestic stock market. Almost half of it falls on Sberbank, "Gazprom" and "LUKOIL". Another index, involving Russian issuers, MSCI EM Europe (it included papers 85 companies from Eastern Europe) are also mainly represented by our "heavyweights". But in more popular among global funds index emerging markets, MSCI EM, Russia's share is more than modest. It is mostly companies from China, South Korea, Taiwan, India and Brazil.

Source: MSCI inc.

However, even with this participation, or "participation" of Russian issuers in the index is a kind of signal for investors. In particular, for index funds is a necessary criterion to enable the company to their portfolio. In addition, MSCI is the basis for the calculation of options, futures contracts, therefore, parties to these segments of the stock market also react to any news on the rebalancing indices.

"the MSCI is the benchmark for international investors. The compilers of the indices are trying to revise the weights of the securities in the index, highlighting the most promising, in their view, the shares and reducing the presence of the securities, the liquidity of which is greatly reduced", — says the head of operations on the Russian stock market IR "freedom Finance" George Vashchenko.

So, due to the recent rebalancing of the MSCI Russia and EM Standard of them were excluded receipts (GDR) Sistema shares of "Rostelecom". This has caused outflow of investors from securities and falling of their quotations. Capitalization of JSFC "Sistema" since the beginning of the week fell to 112.9 billion rubles due to the reduction of shares by 10% (in the medium of paper AFK have lost more than 5%) and "Rostelecom" "fell" by 4.6%. Paper telecommunications company are now below $ 69 per share, with the beginning of the year their price has fallen by almost 20%. In the BCS called the exception of securities "Rostelecom" indices big surprise. "We can expect pressure on the quotations of the company before the changes come into force," — said in the review of investment company.

Unpredictable indices

the Index is a benchmark for investors, in which it is possible adequately to assess the risk of their investments, the state of the industry. However, as noted by the head of Department of investments UK "Raiffeisen Capital" Vladimir Vedeneev, this does not mean that the investor should base its strategy only on the basis of the index. "With a probability of 90% the company's inclusion in the index leads to an increase of its shares, but if a large investor sells securities, the quotations can stand still," he says. However, as a rule, according to the Manager, pending the inclusion of the securities in the index, its price can rise quite a long time.

As an example, the action "Severstal". Last week, the Agency MSCI announced the increase of the coefficient free float of the company. According to analysts Sberbank CIB, this will lead to the inflow of funds passive funds in the shares of Severstal in the amount of approximately $ 13 million. Since the beginning of the week quotes "the Metallurgist" has grown by 2%.

However, as pointed out by chief strategist BKS Vyacheslav Smolyaninov, a participation in the index only serves as an additional catalyst for price movement. "It is necessary to consider more fundamental things, the company's market reporting, external factors", — the expert notes. The same "Severstal", the shares of which have soared since June to 26%, showed a growth due to increased demand for metals and generous dividends. In October it became known that the company is ready to direct on payments to shareholders 100% of free cash flow.

Vashchenko stressed that if the investor wants to make a more risky portfolio that focuses on higher yield, then it is usually included paper, the dynamics of which is very different from the index.

Senior portfolio Manager of the criminal code "Kapital" Vadim Bit-avragim said that the factors that influence the decision whether or not to include the action in the index (market capitalization, free float major shareholders) can be very unpredictable, so to make long-term forecasts on the basis of this criterion is not necessary. "The unpredictable is the capitalization, which can dramatically change due to some market events," he explains. As an example, the financier leads the story with the shares of "Aeroflot", which was considered as one of the main contenders for inclusion in the MSCI index. However, the company's financial performance has disappointed investors, and the value of its shares fell, leading to reduced capitalization. As a result, in the index the Russian airline did not get.

the MICEX-RTS vs aliens

Vyacheslav Smolyaninov from the BCS says that the MSCI far the most important for the Russian stock market, because they cost billions of dollars. Now, the company MSCI Inc. (Morgan Stanley Capital International) is one of the world's largest providers of stock indices. She expects about 160 thousand of indices covering stock markets all over the world. Therefore, according to the financier, any changes in their composition always reflects on the quotations of issuers. For example, the total assets of the funds, the portfolios of which are compiled based on MSCI Emerging Markets, estimated at 1.3 trillion dollars.

"For us, of course, the most important indices of the family of MSCI, and we look for the index of the British stock exchange, FTSE Russia, which includes Depositary receipts of Russian issuers," says Bit-avragim. Now in this index of the 15 largest and most liquid Russian companies traded on the LSE. The index was launched in 2006 and serves as an indicator of the interest of foreign investors in assets in Russia.

Another index, the tracking control, Market Vector Russia Index. Based on it is built the investment portfolio of the largest index Fund investing in Russian equities, RSX (VanEck Vectors Russia ETF). Its assets exceed $ 2 billion. But the domestic MICEX and RTS is not as relevant to the review of the market participants surveyed "We do not see such a reaction in quotations of the companies in case of rebalancing of the Russian indexes. This is logical, because the assets of our index Funds are not comparable with the Western ETFs, that when any change in the MSCI or the FTSE aligning indices their portfolios and shift the value of securities," says Vedeneyev from MC "Raiffeisen Capital". According to NLU, now in index funds is only 2.59 billion (about $ 43 million). Total assets of the foreign funds investing in Russian companies, according to the Manager, exceed $ 250 billion.

unfortunately, in recent years, the share of institutional investors in Russia is not growing, says the Vedeneyev.

Therefore, the dependence of our market from non-residents has increased dramatically. The influence of foreigners can not be overestimated, because, according to the Moscow exchange, now the share of their operations in the market as high as 48%. Over the last five years, the influence of foreigners on the Russian stock market was growing, despite the sanctions and the devaluation of the ruble.


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