| The Russian stock market took a break In the absence of vacationing operators and investors, calm reigned on the Russian securities market. Yesterday was not a particularly eventful day. True, on Wednesday morning, trading participants tried to use the positive news from the world stock and commodity markets that had accumulated over the holidays. The RTS index grew by more than 3% by mid-day, but in the evening it almost returned to its original value, showing a modest plus of 0.84% against the backdrop of low operator activity. Rising oil prices determined Wednesday's favorites: oil company shares. All, with a small exception, which was, of course, YUKOS. Its price fell by 8.3% on the RTS and by 6.7% on the MICEX. This dynamic resulted from a statement by Finance Minister Alexei Kudrin that the state’s tax claims against the company may not be the last. At the same time, Mr. Kudrin cited as a positive example the behavior of LUKOIL, which, at the request of the Ministry of Taxes and Duties, paid the arrears resulting from the company's use of the Baikonur territory, where tax incentives were in effect. As a result, shares of Vagit Alekperov's company rose by 5% on the RTS, and by 6.7% on the MICEX and became growth leaders. The multidirectional movement of the shares of LUKOIL and YUKOS with little enthusiasm from the players for growth once again demonstrated a trend characteristic of the Russian market over the past months: relative freedom from global stock indicators and absolute dependence on domestic Russian realities. In this sense, the week preceding the holiday lull was more indicative of the characteristics of the domestic stock market.
The warning about a possible default of YUKOS, received on Monday, April 26 evening, caused a 10% drop in the value of its securities on all exchanges, including the American over-the-counter ADR market. The downgrade of Yukos' credit rating on Tuesday led to a fall not only in its shares, but also in other blue chips. The market's downward slide was stopped by the nomination of Viktor Gerashchenko to the YUKOS board of directors. By the middle of the day the situation had stabilized, and by the evening YUKOS became the growth leader based on trading results on the MICEX.
On Wednesday, the decline in the Russian market was led by Norilsk Nickel, which fell by 7.5%. This was in line with the global trend: the price of shares of the world's largest aluminum producer Alcoa fell by 4% during the day, steelmaker USSteel - by 8.45%, and gold miner Freeport McMoRan Copper & Gold - by 7.2%. On April 28, Chinese authorities, in an effort to avoid overheating the economy and rising inflation, instructed banks to stop issuing new loans until the end of the current working week, which was followed by a holiday non-working week. This caused a sharp decline in prices for raw materials: sellers were afraid of the destabilization of the Chinese economy after many years of boom and, accordingly, the fall in demand from the main driver of prices in the global metals market in recent years.
The opening of trading on Thursday, April 29, thus took place against the backdrop of bleak reports about the fall of world stock indices, as well as news about the Sayano-Shushenskaya hydroelectric power station, which was predicted to become the “firstborn of deprivatization.” Norilsk Nickel temporarily ceded its role as the locomotive pulling the market down to RAO UES, but by the middle of the trading it still regained the initiative. The fall in world prices for metals was largely recouped by the market on Wednesday, but rumors about the arrest or interrogation of Vladimir Potanin led to the fact that by the end of the trading day, Norilsk Nickel shares lost almost 6.3% on the RTS, and on the MICEX - more than 10% of the price. The RTS index fell by 5.13%, and the MICEX index by 6.65%. Moreover, RAO UES had a large share in this total decline, losing 8.6% on the RTS and 10.1% on the MICEX.
In light of the decline in the Russian stock market that lasted two weeks before the holiday, the current calm is unlikely to indicate a new trend. According to Alexander Golovtsov, head of the department of industry and market research at NIKoil Management Company, the excessive nervousness of the players, demonstrated by them last week, only emphasized the general situation in the market, caused by the expectation of an increase in American lending rates, tightening of China’s credit policy and large volumes of earned profits. which needs to be fixed. However, from Mr. Golovtsov’s point of view, the potential for a fall in the Russian market is almost exhausted. The RTS index, having reached 620---640 points, will begin to grow after several quiet months.
Ruslan Buslov, manager of the IPIFA “Support” of Pallada Asset Management, generally agrees with this. According to him, the market will stop around the 630 point mark of the RTS index, although for the market to be healthier, it would not hurt for it to drop to the mark of 580 points. A fair valuation of Russian securities, according to Mr. Buslov, is somewhere in the region of 700 points, but since the Russian market is developing, and the upward cycle of global emerging markets has been exhausted, it is useful to apply a 20% discount when valuing Russian stocks. It turns out - 560-580 points. If the situation with Interros is not a rumor and events continue according to the Yukos scenario, then this discount should be increased to 30%, taking into account the increasing political risks. “This will be a serious blow. Many Western portfolio investors may close their positions in Russian securities. True, this will only happen if they perceive such a development of the situation as a revision of the results of privatization. If everything is interpreted as fair compensation by the state for previously incurred losses, as many of them already perceive the Yukos case, then they will not sell Russian assets, although they will refrain from buying them,” said Ruslan Buslov. In general, in his opinion, now is a good time to buy shares of Norilsk Nickel and RAO UES: most speculators have already closed their positions in NMMC and almost closed their positions in RAO UES. It is safe to buy Norilsk Nickel, which has recently lost 30% of its maximum value. A reversal of the trend in the market as a whole should be expected after the May holidays.
Indeed, the news of recent days coming from world markets can be used by Russian operators to play for growth after the end of the May holidays. The increase in US lending rates, expected on May 4, has been postponed until June, if not August. The demand for the products of metallurgical enterprises from Chinese consumers, despite pessimistic forecasts, has not decreased. World stock indices and oil prices are rising. Just wait for good news from Russia.
Meanwhile, Bloomberg reported yesterday that for the first time since mid-December last year, a net outflow of funds from funds investing in Russia and Eastern Europe was recorded. Uncertainty over Yukos and China's intentions to rein in a rapidly growing economy led to institutional and individual outflows totaling $104.5 million in the week ending April 28, according to the agency. Igor POLISCHUK |
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