Translated material
Eastern overheat
Asian markets again caused a fall in Russian stock prices
The Asian stock market is making Russian investors nervous for the second time since the beginning of the year . After the fall in Chinese stock prices, the RTS index lost almost 2% yesterday and dropped to 1,926.38 points. Domestic analysts are not inclined to dramatize the situation and expect the correction to be completed in the near future.According to China's National Bureau of Statistics, the consumer price index rose by 2.7% in the first quarter of 2007 compared to the same period last year, and by 3.3% in March. These figures turned out to be significantly higher than expected by analysts. As a result, the Chinese stock market closed in the red yesterday due to fears that the regulator will raise interest rates to cool the economy. In particular, the Shanghai Composite stock index fell 4.52% to 3,449,016 points, which was the most significant decline since February 27, 2007, when China triggered panic in world markets. Due to Chinese events, shares of South Korean exporting companies fell, causing the market to reach a one-month low. Japan's blue-chip Nikkei index fell 1.67% to 17,371.97 points.
Macroeconomic data released after the Chinese market closed confirmed investors' fears. China's GDP in the first quarter of 2007 grew by 11.1% compared to the same period in 2006, while analysts had expected growth of 11%. In the fourth quarter of 2006, GDP growth was 10.4%. Shortly after the release of these data, Chinese Prime Minister Wen Jiabao issued a statement that China must take timely measures to prevent the economy from overheating. He noted that the growth of the money supply and lending was too high, and therefore, in his opinion, the authorities should make serious efforts to maintain price stability. Mr Jiabao also said steps needed to be taken to prevent the economy from overheating and to remove "unreasonable" export incentives.
Russian traders caught the mood of their Asian colleagues, and they rushed to take profits. Immediately after the opening, liquid securities fell within 2-3%. However, the excitement did not last long. “At the beginning of trading in the blue chip sector, a deepening downward correction was observed, but soon support was found for most securities,” says Alexey Bystrov, Deputy General Director of the Olma Investment Fund.
Due to the situation in Asia, Europe also did not open very well. The pan-European index of highly liquid securities FTSEurofirst 300 fell by 0.9% to 1551.3 points. “However, by the evening in Eastern European countries, part of the decline had already been won back,” emphasizes Vladimir Vedeneev, head of the stock market analysis department of the Bank of Moscow. Trading in the US also opened in the red yesterday. By their opening, the main US Dow Jones index lost 0.39%, reaching 12753.86 points. The Nasdaq Composite Technology Sector Index fell 0.68% to 2,493.33.
At the end of the day, the RTS index fell by 1.97%, and the MICEX index by 2.12%. The leader of the fall on the RTS was shares of RAO UES, which lost 3.97%. Shares of LUKOIL fell by 2.81%, Rosneft by 2.56%, Gazprom by 1.9%, and Norilsk Nickel by 2.09%. Sberbank's securities looked better than the market, falling only by 0.64%. “High trading volumes were recorded in the first hour of the session,” points out Vladimir Vedeneev. “During this time, most of the sales were completed, then investors began to calm down.” In his opinion, “we fell 90% because of the Asian market.” There are fears that the Chinese authorities will tighten monetary policy, raise the discount rate and limit the access of foreign investment, the expert notes. However, as Mr. Vedeneev believes, nothing indicates any serious turn in the market, and we are dealing with a short-term correction. “If the Asian market does not continue to fall tomorrow, then everything will recover here,” the analyst predicts.
Alexander Razuvaev, head of the market analysis department at Sobinbank, also does not believe that the decline will be long-lasting: “The main reason for the correction came from outside. However, our securities are fundamentally cheap and should soon emerge from the crisis. In the long term, oil will remain the main idea of the market.” Thus, according to analysts, there are chances that the RTS index will soon return to the level of 2000 points, which it first surpassed at the end of last week.
The MICEX Stock Exchange suspended trading yesterday at 17.41 Moscow time. As the press service of the exchange explained to journalists, this happened for a technical reason (due to problems in the data transmission network), when the main trading mode had already ended. Trading was resumed at 19.00.