A STRONGER RUB: Revisiting M&M Sector Implications
The RUB has appreciated from RUB60.5/USD in August to 57.5 on a higher oil price, and USD weakness against major world currencies. Our Macro team has become less bearish on the Russian currency, anticipating the YE17 FX in a range of 57-59/USD vs 62 previously, which assumes only modest depreciation from current levels. A stronger RUB harms exporters and we believe now is a good time to revisit the implications of RUB FX volatility for the M&M sector. We highlight low-margin RUSAL and Evraz as the most exposed, and Polyus and Nornickel as relatively immune. The rule of thumb is that all else equal, the lower the profitability, the higher the earnings sensitivity to volatility in RUB FX.
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