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21 May 2014
EMEA EM Express: Russian-Chinese business agreements boost stocks, gas deal finally signed
Russian stocks rose on Wednesday following the signing of several bilateral business agreements by Russian president Vladimir Putin and Chinese president Xi Jinping in Shanghai yesterday. According to recent reports, the delayed gas deal has also been struck, although it is still not known what price has China agreed to pay. A pipeline for transporting the gas will be built between the two countries.
“This is a crucial victory for Russia, coming at a moment when it is become increasing isolated from the West,” BBH Global Currency Strategy Team emphasize.
“Still, the amount of gas exports foreseen in the deal amount to about one-fifth of what Russia exports to Europe. Also note that natural gas represents about 60% of Russia’s total exports,” the analysts add.
According to one of the other deals, the Agreement on Cooperation, signed between Bank of China and Russia's second biggest lender VTB, the financial institutions will now be able to conduct transactions in domestic currencies instead of using the dollar.
“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” VTB said in a statement.
Accords were also signed between Russian and Chinese energy companies. The Micex Index climbed for the fourth day to the highest level since February 28, by 0.1% to 1,426.37 on Wednesday. Gazprom rose 2.2% after the gas deal announcement, reversing yesterday’s losses.
Optimism was also boosted by Russian soldiers' preparations to pull away from the Ukrainian border and Vladimir Putin's assurances that they would be back at they bases by June 1. The news of the withdrawal still remains unconfirmed by NATO.
Economic data
Data released on Wednesday showed that South African inflation slowed down to 0.5% in April on a monthly basis , from +1.3% in March, above forecasts of a 0.3% increase. Year-on-year CPI ticked up to 6.1%, following a 6% rise.
“We do not expect a rate hike this month in response to higher than targeted inflation,” the BBH Global Currency Strategy Team comment, ahead of tomorrow's South African Reserve Bank policy meeting. “Moreover, the stabilization of the rand removes any sense of emergency.”
Russian PPI climbed 0.7% month-on-month in April, down from the 2.3% increase and slightly below consensus of +0.8%. On an annual basis PPI edged up 7.2%, following 5% growth and beating expectations of +6.9%.
Technicals
The Russian ruble rose for the fourth day by 0.1% against the central bank’s target basket of dollars and euros. USD/RUB was down by 0.26% at 34.4236, at the moment of writing.
On Tuesday the USD/RUB daily FXStreet Trend Index was slightly bearish, with the OB/OS Index oversold. RSI was at 32 at the last close, and has climbed to 34 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 4765 pips, with ATR (14) shrinking at 3037 pips. The 1D 200 SMA was at 33.9019, while the 1D 20 EMA was at 35.1327.
“This is a crucial victory for Russia, coming at a moment when it is become increasing isolated from the West,” BBH Global Currency Strategy Team emphasize.
“Still, the amount of gas exports foreseen in the deal amount to about one-fifth of what Russia exports to Europe. Also note that natural gas represents about 60% of Russia’s total exports,” the analysts add.
According to one of the other deals, the Agreement on Cooperation, signed between Bank of China and Russia's second biggest lender VTB, the financial institutions will now be able to conduct transactions in domestic currencies instead of using the dollar.
“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” VTB said in a statement.
Accords were also signed between Russian and Chinese energy companies. The Micex Index climbed for the fourth day to the highest level since February 28, by 0.1% to 1,426.37 on Wednesday. Gazprom rose 2.2% after the gas deal announcement, reversing yesterday’s losses.
Optimism was also boosted by Russian soldiers' preparations to pull away from the Ukrainian border and Vladimir Putin's assurances that they would be back at they bases by June 1. The news of the withdrawal still remains unconfirmed by NATO.
Economic data
Data released on Wednesday showed that South African inflation slowed down to 0.5% in April on a monthly basis , from +1.3% in March, above forecasts of a 0.3% increase. Year-on-year CPI ticked up to 6.1%, following a 6% rise.
“We do not expect a rate hike this month in response to higher than targeted inflation,” the BBH Global Currency Strategy Team comment, ahead of tomorrow's South African Reserve Bank policy meeting. “Moreover, the stabilization of the rand removes any sense of emergency.”
Russian PPI climbed 0.7% month-on-month in April, down from the 2.3% increase and slightly below consensus of +0.8%. On an annual basis PPI edged up 7.2%, following 5% growth and beating expectations of +6.9%.
Technicals
The Russian ruble rose for the fourth day by 0.1% against the central bank’s target basket of dollars and euros. USD/RUB was down by 0.26% at 34.4236, at the moment of writing.
On Tuesday the USD/RUB daily FXStreet Trend Index was slightly bearish, with the OB/OS Index oversold. RSI was at 32 at the last close, and has climbed to 34 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 4765 pips, with ATR (14) shrinking at 3037 pips. The 1D 200 SMA was at 33.9019, while the 1D 20 EMA was at 35.1327.