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RF Equity Market: Mechel Supports Optimism

Over the past week, from December 21 to 25, the Russian stock market continued to fall, increasing the rate of decline. The Moscow Exchange index dropped 0.84% ​​over the week, to 3246.35 points, while the RTS index fell 1.7%, to 1378.36 points. The decline in quotations was facilitated by falling commodity prices and the threat of new US sanctions. During the week, the price of Brent oil fell by 1.7%, while gold was marking time, losing 0.06% by the end of the week. The leaders of growth were the shares of the coal and steel industries, and the outsiders were the shares of non-ferrous metallurgy and the oil and gas sector. Ordinary shares of Mechel soared by a record 22.5%, to 78.1 rubles. per share. Although the reasons for such a strong rally are not entirely clear, it can be assumed that the rise in the company’s shares could be associated with a sharp rise in prices for coal and steel. The market is likely hoping that with high coal prices, it will be easier for the company to deal with its huge debt burden. Our target price for ordinary shares of Mechel is RUB 83, we recommend “HOLD” on the securities. Depositary receipts of the aluminum corporation Rusal showed the dynamics worse than the market. Over the week the paper fell in price by 4.8%, to 34.7 rubles. for the paper. The fall in securities was most likely due to Western media reports that sanctioned Russian billionaire Oleg Deripaska, the former owner of Rusal, continues to exert significant influence on the Rusal business group, thereby increasing the threat of new sanctions against it. Our target price for Rusal is RUB 37, with a “hold” recommendation. We believe that this short working week, the last trading week of 2020, the RTS index will trade in the 1370-1410-point corridor, while the Moscow Exchange in the range of 3260-3290 points .________________________ Natalia Milchakova, Deputy Head, IAC “Alpari”

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