As we expected, a small wave of profit-taking swept through the stock market yesterday. At the end of the trading day, although the market grew by a symbolic 0.1%, it retreated by more than 60 points from the highs of the day at 3016 points.
The reasons for the correction were not only the overbought market, but also political statements. So, US President Donald Trump admitted that the meeting on Friday could be a "trial", there would be no deal on Ukraine, and he could withdraw from the negotiation process altogether. There were also negative comments from Europe and Ukraine itself.
At the same time, demand shifted to securities that lagged behind the upward movement. These are, first of all, titanium producer VSMPO Avisma (+9.1%) and ferrous metallurgists, which grew by 4.3-5.1%. Here, we are only looking positively at VSMPO, since the warming of Russia-USA relations may lead to an increase in titanium sales in the high-margin overseas market.
As for steelworkers, it is unlikely that Europe will release them to its markets soon. We do not rule out a correction for these securities today. High-risk investors can try to open a short for ferrous metallurgy.
In general, we believe that the market has already more than played back the verbal geopolitical positive. Real actions are needed to continue the upward movement and consolidate above 3,000 points.
In the meantime, some of the speculative longs should be fixed. It is dangerous to open new positions.
The index of the Moscow Government Bond Exchange increased by 0.7%. Perhaps debt traders have hopes for an early return to the OFZ of foreign investors, who will be able to drain the purchased securities. We are not sure that this will happen in the foreseeable future. We also believe that the OFZ market is overbought and we are waiting for a correction on it, which may well free up some of the speculative capital to invest in stocks.
The ruble, paired with the yuan, hit strong support at 11, but did not storm it. We do not rule out a puncture of this level, but shorting the pair now looks more risky. We recommend waiting for the pair to turn up to open a speculative long, or gradually increase positions in the yuan against the ruble.
Alexey Antonov, Head of Investment Consulting at ALOR BROKER
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