Prices cited in the body of this report are as of the last close before, or the close on, 29 Nov 2018 (except where indicated otherwise). VTB Capital analysts update their recommendations periodically as required. This research report was prepared by the analyst(s) named above who is(are) associated with JSC VTB Capital and is distributed by JSC VTB Capital and VTB Capital PLC and their non-U.S. affiliates outside the United States. This VTB Capital research report is distributed to investors located within United States by Xtellus Capital Partners, Inc. (“Xtellus”) as a “third-party research report” as defined in Rule 2241(a)(14) and Rule 2242(a)(17) of the U.S. Financial Industry Regulatory Authority. Please refer to the Disclosures section of this report for other important disclosures, including the analyst certification and information required by regulation.

On Markets

Global backdrop. Global stocks held on to their gains this week ahead of the G20 summit. The Fed’s dovish shift lent markets a hand amid Sino-American trade uncertainty. The MSCI World (+3.1%) and MSCI EM (+3.0%) were both up. The S&P 500 (+4.0%) rallied. The dollar (DXY unch.) was flat, while the UST 10Y yield (3.01%; -3bp) moved lower. The European bourses (Stoxx 600 +0.9%; DAX +0.6%; CAC 40 +1.1%, FTSE 100 +0.1%) were positive. Italian assets also posted solid gains as the Italian government adopted a more conciliatory tone on its budget: the FTSE MIB (2.5%) was up, while the Italian 10Y yield (3.2%; -20bp) tightened significantly. The pound (-0.5%) weakened after UK Prime Minister Theresa May warned the government to prepare for a No Deal Brexit if she loses the parliamentary vote on her deal on 11December. Asia (Topix +1.9%, Kospi +2.9%, Hang Seng +2.3%) held up well amid trade anxiety. China (Shanghai Comp +0.4%) was the region’s laggard. The G20 summit is due to kick off today, but investors’ eyes will be on the Saturday meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. Back home, Russia (RTS +0.7%) posted muted gains, while the rouble (-1.2%) depreciated on the back of heightened geopolitical tensions. Other CEEMEA markets fared much better, with Turkey (BIST 100 +4.2% / TRY +2.4%), Poland (WIG 20 +2.6% / PLN +0.2%) and South Africa (TOP 40 +2.1% / ZAR +0.8%) up. In the commodities space, Oil (Brent -0.2%) was slightly down on the week, as pressure came from Saudi Arabian Energy Minister Khalid al-Falih’s comments that the kingdom would not cut its output alone, given how Russia has recently been elusive about production cuts. President Vladimir Putin, speaking at VTB Capital’s Russia Calling! Investment Forum on Wednesday, said Oil prices at USD 60/bbl were balanced and fair. Today, Russian Energy Minister Alexander Novak said Russia would keep its output steady until the end of the year, as current prices are agreeable to both producers and customers. Moreover, EIA data showed the tenth straight week of rises in US crude stockpiles (+3.6mn bbl vs. BBGe +0.6mn), weighing on oil prices. Base metals (LMEX -0.3%) were slightly negative, mainly due to Aluminium (-0.5%), while Copper (+0.1%) and Nickel (+1.3%) were up.

Russia – equities. The Russian market delivered gains. The USD-valued RTS index (+0.7%) reversed its Monday’s weakness over the week, returning to the area above the 1,100 level. The RUB-valued MOEX Russia index (+1.8%) tested the 2,400 level, although that was unsuccessfully and the benchmark retreated from it on Friday. RUB (-1.2%) depreciated over the week, making several forays below the 67 level. As for individual names, SSA (+8%) jumped on the back of leaks that Sistema might sell Detsky Mir. FIVE (+5%) continued its recovery, consolidating above its 100D MA. EPAM (+5%) bounced after recent underperformance. GMKN (+5%) expanded both MTD and YTD gains to +14%, marking a fresh record high in RUB-terms. GAZP (+5%) advanced, thanks to headlines that the company’s dividends might be a double-digit number. Among laggards, we note ENPL (-5%) and UC Rusal (486 HK - 4.0%). Steels also turned to the red, with NLMK (-4.7%) underperforming the most. HYDR (-4.7%) continued to slide, halving in USD-terms since its peak in October 2017. SBER (-3.8%) declined as well.