Russian Stocks Outperforming Since (Despite?) Sanctions

A look at how the latest round of US sanctions are affecting Russian companies, whose performance is once again being subjected to close scrutiny following the imposition of fresh sanctions.

However, the stock prices of major Russian corporates such as RUSAL and Magnit are so far demonstrating remarkable resilience:

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RUSAL is the top pick: its shares are trading at their highest price on the Hong Kong Stock Exchange since April 2015; rising 6.25% today, +21% in the last week and +60.7% YtD.(likely supported by the favourable sector changes with Chinese aluminium production cuts expected to come through in 2H 2017)

From 2 August (when President Trump signed the new sanctions bills), the blue-chip Russian stocks have so far performed well, while the MICEX Index is up 1.1% and the MSCI Russia Index is up 2% over the same period.

Mechel’s share price grew by 9.3%
Sberbank’s stock rose by 4.5%
Severstal: +3.2%
Nornickel: +1.7%
Magnit: +1.5%
Gazprom +1.5%
Novatek +1.5%
Polyus +1.1%

S&P Global Ratings have commented that the latest sanctions have ‘no immediate implications for the agency’s sovereign credit ratings on the Russian Federation’, which ‘continue to be supported by Russia's strong external and fiscal balance sheets’ and stated that they expect the economy to return to positive growth in 2017.

Several analysts, including at HSBC and Credit Suisse, have noted that the sanctions have had little effect on Russian stocks. HSBC’s John Lomax commented in a note that he expects Russian stocks to perform well in 2H 2017, observing that the impact from sanctions was ‘muted’ and ‘likely to be limited’, while arguing that negative sentiment towards the country should gradually dissipate.