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Norvik Research 19.10.2016

19/10/2016 15:53

Global developments

Emerging markets assets are supported by steady macroeconomic data from China. Q3 GDP rose 6.7% YoY, industrial production in September was up 6.1% YoY, retail sales advanced 10.7% YoY, all broadly in line with expectations. MSCI Emerging Markets Index rallied 1.5% yesterday and is up 0.3% today. Nikkei 225 is up 0.3%, CSI 300 is down 0.2%, Euro Stoxx 600 is 0.1% lower. S&P futures are marginally lower, 10-year US treasury yields are up 1 bp at 1.74%. The dollar index is down 0.2% after US September CPI ex food and energy came out at 2.2% YoY lower than consensus forecast of 2.3%.

Saudi Arabia plans to issue Eurobonds for up to $15bn this week. There will be three types of maturities (5, 10 and 30 years) with yield premia to US treasuries estimated at 160, 185 and 235 bps, respectively.

Oil prices rose on favourable inventories data. API reported that crude oil inventories fell 3.8 mn bbl in the previous week against consensus forecast of a 2.1mn bbl build-up. Brent prices are up 1.4% at $52.4/bbl.

Russia and CIS area developments and market colour

In today’s publication of Russia’s monthly economic indicators, focus is on consumption data. Market consensus is for annual decline in retail sales to moderate to 4.4%, from 5.1% YoY in August. In its latest comments on consumer demand, the central bank warned that higher inequality in income distribution and erosion of middle class leads to lower price elasticity of demand and reduces control of monetary policy over prices.

The rouble is flat at 62.5 against the dollar. OFZ yields 4-10 bps tighter today. Russia and Kazakhstan sovereigns are marginally tighter. Ukraine-19 tightened 15 bps yesterday and is slightly wider today. Belarus-18 tightened 5 bps yesterday and a further 20 today. Azerbaijan-25 is little changed.

Corporate news

MHP has reported strong operational results for Q3. Poultry meat production increased by 5% YoY to 149.8 thousand tonnes (Kt) driven by increased production at Myronivka and Oril Leader farms. As a result, poultry production in the last 12 months reached 601.2 Kt for the first time exceeding 600 Kt mark.

Meat sales to third parties increased by 11% YoY to 166.3 Kt. Growth was driven by increased export sales which reached 58.6 Kt or 35% of total sales, while domestic sales declined by 7% YoY to 107.7 Kt. Average chicken meat prices increased by 9% YoY to UAH 30.23/kg, while in US dollar terms prices remained near multi-year lows reached in H1 2016.

Tatfondbank seeks to raise $150 mn in a new 3-year Eurobond. Given the small size of the issue, we expect it to be illiquid. Yield targets have yet to be disclosed.

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