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Investment Outlook Fourth Quarter 2020 Update

Oct 3, 2020

Investment Summary
  • The global economy is gradually entering a post-pandemic “new normal.” Risks of new economic shocks due to the “second wave” have considerably diminished over the past quarter. Higher asset prices and lower cost of borrowing on the back of accommodative monetary policy is helping the real economy recover as well.
  • Yields in the developed world are still not far from fresh historical lows, while monetary aggregate dynamics and economic activity indicators point to higher inflation (maybe sharply higher) and a steeper yield curve over the next 12-36 months.
  • We are raising our average 2H20 Brent oil price forecast from USD 40 to USD 42.5 due to recovery in global economic activity. 2021 scenarios: bear; USD 40, base; USD 50, bull; USD 63. The OPEC+ agreement remains a key driver for oil prices. OPEC+ should cut 7.7 mbpd in 2H20 and 5.8 mbpd in 2021 (off estimated production of 43.85 mbpd), which is seen as sufficient to provoke price growth to levels above USD 50 for Brent, after which restrictions may be revised.

Investment Preferences

  • We upgrade our stance on Russian equities to Overweight (+) from Neutral (=).
  • We remain neutral on local Russian RUB debt.
  • We keep a positive stance on GEM USD-denominated debt.
  • Within equities our preferred names are ROSN & SNGSP in Oils, CHMF and NLMK in Metals, SBER in Financials, FIVE in Consumer Staples.


icon_pdf.gif   Full version of the report could be found attached.

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