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Investment Outlook Second Quarter 2020 Update

Mar 31, 2020

Investment Summary
  • Probably deepest economic contraction since 1930s, but may be brief due to large policy support;
  • Coronavirus can and likely will be controlled based on experience of China and S. Korea;
  • Unprecedented monetary/fiscal response globally;
  • Markets usually hit their low 3-4 months before recessions end;
  • The market could have already bottomed or might bottom by end-May;
  • Second virus wave Autumn/Winter - equity markets might experience a second down leg;
  • Oil 30/40/50 bear/base/bull cases with 30%/40%/30% probabilities;
  • According to our estimates, the current ruble exchange rate of about 80 rubles / $ is already priced-in a bear case of $ 30 / barrel;
  • At the same time, the current level of the key interest rate (6%) does not reflect the bear case with oil prices of $ 30 per barrel and may rise.

Investment Preferences

  • We are OW Russian equities, EW Russian hard-currency debt, OW GEM Debt and UW RUB debt;
  • We like Steel, Fertilizer, Agriculture, Real Estate and Utilities within Russian equities;
  • We are neutral on base / precious metals and banking;
  • We prefer to be underweight oil & gas in the current environment.

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

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