Russian Markets Research July 9-15, 2007
Investors are back in Russian stock market!
According to Russia’s Economy Minister German Gref, for the first ten days of July 2007, Russia’s inflation stood at 0.3%. The Ministry expects inflation in July to reach 0.7%. Russia’s Inflation in June 2007 is higher than expected – some regions posted inflation at more than 2%. Inflation risks are on the upside. Russia’s gold and foreign currency reserves reached a record of $408,4bn.
The liquidity decreased on the Russian money market and the overnight rate increased last week compared to the previous week.
Yield of UST10 still lies above psychological level of 5.00%.
The U.S. currency is under pressure. EUR/USD posted a new record high at 1.3813 last week. EUR/USD rose by 1.14% and closed the week at 1.3782.
Investors came back to the Russian stock market. RTS showed its best last week – broke psychological level of 2000, and rose confidently by 4.39% posting new life-time high at 2,065. All these cleared the road for further up. The week was closed without considerable profit taking. MICEX rose by 3.28%, SEP future on RTS rose by 4.69% and closed the week above RTSI.
Last week DOW posted a new life-time high at 13,934 beating previous all-time high at 13,683.
Thus DOW approached very near to a new psychological resistance of 14,000 and something hints that there will be at least technical attempt to beat this level.
Last week oil prices advanced again at the fast pace. Brent, Urals, and WTI rose by 2.00%, 3.68% and 1.50% and closed the week at $79.17, $76.02, and $73.89 respectively. Stock prices of Russian oil companies have been rising for three consecutive weeks. Last week they rose by 5.35% but from the beginning of the year they still fell by 1.54%.
Russian Economic Update
Russia posted July month-to-date inflation
According to the Russia’s Economy Minister German Gref, for the first ten days of July 2007, Russia’s inflation stood at 0.3%. The ministry expects inflation in July to reach 0.7%.
Russia’s trade surplus dropped by 16.9%.
Russia’s trade surplus stood at $60.7 billion from January to May 2007, down 16.9% from $73.1 billion in the corresponding period of the last year. Exports amounted to $128.6 billion from January to May, an increase of 9.3 from the same period of 2006. Exports to CIS countries were reported at $19.1 billion (up 21.7%), and exports to other countries stood at $109.5 billion (up 7.4%). Imports totaled $68 billion, up 52.4% on the year. Imports from CIS countries were $11.1 billion (up 44.4%), and imports from other countries made $56.9 billion (up 54%). Russia’s trade turnover amounted to $196.6 billion in the first five months of this year, up 21.1% from the same period of last year. Trade with CIS countries stood at $30.2 billion (up 29.1%), and trade with other countries totaled $166.4 billion (up 19.8%).
The MICEX Stock Exchange is starting to publish its client statistics. By the end of the H1 2007 MICEX had 385,814 unique clients. From them: 368,644 individuals, 11,825 legal entities, 1,760 – non-residents, 3,585 – clients given their capital to asset managing. Total amount of clients is 464,032 as of July 1, 2007.
According to the Russian Federal Customs Service, Russia’s natural gas exports dropped by 14.58% to 69.7bn cubic meters in January-May 2007 compared to the same period a year earlier.
Rosselkhoznadzor abandoned supplies of cattle breeding from almost 80 foreign companies.
Russia posts H1 2007 budget surplus
According to the Russian Finance Ministry, Russia’s federal budget surplus amounted to nearly $41.86bn in the first six months of 2007. Budget surplus (excluding repayment of government debt) stood at around $44.27bn in H1 2007. According to preliminary data, budget revenue amounted to almost $126.46bn in January-June 2007, or 97.8% of the target budget revenue for the first half of 2007. Budget spending was $84.60bn, or 82% of the target budget spending. In January-June 2007, the Federal Tax Service transferred $63.17bn to the federal budget or 99.4% of the approved budget revenue for H1 2007.
Russia narrows fuel and energy export share
Fuel and energy accounted for 65.8% of Russia’s exports outside the CIS in January-May 2007, down from 71.4% in the same period a year earlier. According to the Federal Customs Service, Metals and metal products represented 16.7%, chemicals 5.8%, lumber and paper industry products 3.7%, and machinery and equipment 3% of Russia’s overall exports. Russia exported 93.9m tonnes of crude oil in January-May 2007, which is 7.1% more than during the same time frame in 2006. The contract price of crude oil averaged $407.6 per tonne during this period. Russia’s exports amounted to $128.6bn in the first five months of 2007, up 9.3% from the same period a year earlier. Exports outside the CIS grew by 7.4% to $109.5bn, and 21.7% to $19.1bn to the CIS.
Economic trends
According to Euroset, the real number of mobile communication service subscribers grew by 7.1% to 77.8m people in Russia in the first six months of 2007. The subscriber base stood at 160m (according to the number of SIM-cards sold), which is 4.5% greater than in the same period a year earlier. Euroset’s analysts project that the real number of mobile service subscribers will reach 82.3m people and the number of SIM-cards will increase to 169m by the year-end. According to the research data, mobile communication service penetration will stand at 58% and 63% in 2007 and 2008, respectively.
According to Euroset, retail sales of mobile phones dropped in Russia in Q2 2007 by 6% compared to the same period of a year earlier.
Russia’s gas output edged up 0.2% to 285bn cubic meters in January-May 2007.
As of July 1, 2007, the Russian Stabilization Fund reached $122.41bn, with $32.30bn allocated to the Fund in the first six months of 2007.
Sources: The Central Bank of Russia, Reuters, Cbonds, The Finance Ministry
Russian Money Market
Last week overnight rate lay in the band of 3.15–3.38%, for one week rubles could be found at 3.20-4.78%, and for one month at 3.07-4.20%. Overnight rate closed the week at 3.36%.
The liquidity decreased on the money market last week compared to the previous week. Overnight rate rose last week compared to the previous week.
Balances on C/A opened the week at 461.6bln rubles and closed it at 473.8bln rubles. Bank deposits with the CBR opened the week at 847.1bln rubles and closed it at 743.7bln rubles. Bank deposits with CBR decreased by almost 90bln rubles last week.
The total flow of balance on C/A and deposit accounts with CBR decreased by 417bln rubles last week compared to the previous week. The average total liquidity balance per day decreased to 1,248bln rubles compared to 1,331bln rubles in previous week.
GOLD AND FOREIGN CURRENCY RESERVES:
CBR reported that Russia’s gold and foreign currency reserves amounted to $408.4bln as of July 06, 2007, stepping up by $2.4bln or 0.59% from their previous level.
The Economy Ministry’s forecast (will rise by): $90-95bln in 2007, $48.3-71.3bln in 2008, $23.6-51.5bln in 2009, and $14.44-25.5bln in 2010.
However, since January 1, 2007, the reserves have already expanded by $105.4bln or 34.79%.
Gold and foreign currency reserves
US Treasuries market was again in focus for the whole last week. The yield of UST10 fell by 3bps from 5.14% to 5.11% last week. On Tuesday it closed at 5.03%. Yields on short tenor US papers also fell last week. European benchmarks’ yields also declined.
On the Russian ruble bond market Tuesday and Thursday had largest trade volume within last week.
Weekly top movers from 1 sttier and OFZ were Gazprom-9 (+0.88), Lukoil-3 (+0.79), Lukoil-4 (+0.56), FSK UES-4 (+0.31), RZHD-7 (+0.31).
Weekly top movers from 2 nd-3rdtiers were UZPS-1 (+0.86%), Adamantit-2 (+0.61), VolgaTelekom-2 (+0.36), Nuritek (+0.29), Magnit-2 (+0.28).
Weekly top Eurobond movers were Venezuela 34 (+2.52), Venezuela 27 (+1.74), Venezuela 20 (+1.31).
We observed interesting changes in volume of bond markets in June 2007 compared to May 2007: volume of GKO-OFZ market fell by 13bln rubles, corporate bond market rose by 60bln rubles, sovereign Eurobond market fell by 2bln rubles, corporate Eurobond market grew by 6bln rubles.
Russian Stock Market
MARKET PERFORMANCE: RTS at last broke the psychological level of 2000. Sales below 2000 were moderate and didn’t much affect an upward trend. Market slowly but confidently rose by 4.39% last week and closed it at 2,061. RTS posted a new life-time high last week at 2,065. Breaking 2,000 opened the road to 2,100 and even to 2,200. Foreign investors and large traders came back to the Russian stock market.
September future on RTS tagged its base asset and was trading above it for the whole week. It closed the week at 2083 (+4.69%). MICEX and MICEX COMP indices closed the week at 3,425.39 (+1.93%) and 1791.55 (+3.28%) respectively.
Last week oil prices advanced again at the fast pace. Brent, Urals, and WTI rose by 2.00%, 3.68% and 1.50% and closed the week at $79.17, $76.02, and $73.89 respectively. Stock prices of Russian oil companies have been rising for three consecutive weeks. Last week they rose by 5.35% but from the beginning of the year they still fell by 1.54%.
FINANCIALS: Promsvyazbank (net profit dropped by 22% to $82m in Q1 2007 compared to $105m in the same period a year earlier), National Reserve Bank (net profit surged to $94m in Q2 2007), PeterStar (net profit for 2006 increased by 36% to $23.2mln), OGK-4 (net profit surged to $208m in 2006 compared to $6.35m in 2005), Mechel (net profit surged three-fold to $205.014m in Q1 2007 compared to the same period a year earlier).
ISSUES, ACQUISITIONS & INTENTIONS: Nornickel prolonged till July 25 a proposal to buy remaining 10% of LionOre shares at 27.5 Canadian dollars. At present Nornickel owns 90% of LionOre.
Sistema-Hals purchased a 28% stake in KAMELIA Health Spa in the Black Sea resort of Sochi, raising its stake to 95.58%. The value of the transaction was not disclosed.
Technopromexport, a leading Russian electricity exporter, found a buyer for its stake in the machine building plant ZiO-Podolsk. The company says that the stake was bought by structures that are part of the Atomenergoprom holding.
Rosneft confirmed it has sold its 50% stake in Tomskneft to Vnesheconombank.
The shareholders of Sberbank approved a 1-for-1,000 split of common shares a 1-for-20 split of preferred shares which will start on July 18.
Gazprom boosted its stake in Mosenergo from 42.7% to 49.9%. Thus, Gazprom and it affiliates have consolidated a controlling stake (more than 52%) in the company.
DEALS: AutoVAZ will sign long-term agreements with NLMK, Severstal and MMK to stabilize prices.
TNK-BP plan to join the markets of Kazakhstan and Turkmenistan, yet they do not rule out that they may enter projects of supplying oil to China.
Rosneft and Aeroflot - Russian Airlines have signed a general strategic partnership and cooperation agreement to enable joint use of operational and scientific potential, human and financial resources of both companies with a view to strengthen the economic capacity of both parties.
Rosneft and Royal Dutch / Shell have signed an agreement on strategic cooperation on the exploration and development of oil and gas fields, as well as in oil refining and sales.
Transneft will celebrate the completion of a thousand-kilometer-long stretch of the Eastern Siberia - the Pacific Ocean Pipeline (ESPO).
Investors came back to Russian stock market. RTS showed its best last week: broke psychological level of 2,000, and rose confidently by 4.39% posting new life-time high at 2,065. All these opened road further up. The week was closed without considerable profit taking. MICEX rose by 3.28%, Russian oil stocks grew by 5.35%, SEP future on RTS rose by 4.69% and closed the week above RTSI.
Source: Reuters.
US Stock market. Oil Prices. World’s Indices.
DOW:
Something incredible is going on with DOW. Last week it posted a new life-time high at 13,934 beating previous all-time high at 13,683. Thus DOW approached very near to a new psychological resistance of 14,000 and something hints that there will be at least technical attempt to beat this level. From the very beginning of the week DOW fell by approximately 200 points and starting from Wednesday it climbed up. Important is also that DOW closed the week near its all-time high which increases the probability for it to continue an upward trend. DOW closed the week at 13,905.
US ECONOMIC DATA PUBLISHED:
Consumer credit May +12.9 bln vs. +2.3 bln April.
Wholesale inventories May 0.5% vs. 0.3% April.
Import May 192.2 bln vs. 188.0 bln April.
Export May 132.4 bln vs. 129.5 bln April.
International trade May -60.0 bln vs. -58.5 bln April.
Jobless claims (week to 07.07) 308K vs. 320K.
Federal budget June +27.5 bln vs. -67.7 bln May.
Export prices June 0,3% vs. 0.1% May.
Retail sales June -0,9% vs. 1.4% May.
Import prices June 1,0% vs. 0.9% May.
Retail sales excluding auto June -0.4% vs. 1.3% May.
Business inventories May 0,5% vs. 0.4% April.
Michigan sentiment index July preliminary 92,4 vs. 85.3 June.
HIGHLIGHTS FROM LAST WEEK’S SPEECHES:
ECB TRICHET: Latest data broadly positive. Economy to expand at solid rates.
In 2007 monetary policy continued to anchor inflation expectations.
ECB GARGANAS: Sees signs of quality deterioration in US subprime loans. Impact of US subprime woes limited so far but may spread to other markets. GERMANY, Finmin: ECB FX intervention is no solution. EMU competitiveness not decided in FX market. Economy is so fit that FX is less of a problem now.
FED, Plosser: Consumer demand is being maintained and US exports should be helped by the weak dollar.
EU ALMUNIA: Wages must develop in line with productivity. Interest rates still very low.
BOE’s Bean: Interest rates may take time to impact on inflation and demand.
OIL PRICES:
Last week oil prices advanced again at the fast pace. Brent, Urals, and WTI rose by 2,00%, 3,68% and 1,50% and closed the week at $79,17, $76,02, and $73,89 respectively. Stock prices of Russian oil companies have been rising for three consecutive weeks. Last week they rose by 5,35% but from the beginning of the year they still fell by 1,54%. 10
Algeria’s Energy Minister Khelil reported: (1) ‘Not much’ OPEC can do to bring down oil prices. (2) Plenty of crude oil stocks, problem with capacity and refining, (3) Even if OPEC increases production, won’t have an impact on prices, (4) Does not see oil prices hurting the economy
Qatar Oil Minister reported saying that OPEC cannot do anything about the high price of oil.
US EIA oil data showed some consecutive rises in inventories by 1-2mln barrels per week in the average.
WORLD INDICES
Last week world main market indices showed the positive growth. Winners of the week were DJI (+2,17%), NQCOMP (+1,52%), S&P500 (+1,44%).
This Week’s Agenda
July 16
USA: Empire State Mfg Survey July
July 17
USA: ICSC-UBS Store Sales
USA: Redbook
USA: PPI and Core PPI June
USA: Treasury International Capital May
USA: Industrial Production June
ISSUES: Miel-Finance to sell RUB 1,5 bio of domestic bonds with a 3-years maturity and a put option from par at the end of the 1-year.
ISSUES: The Udmurt Republic to sell RUB 1,5 bio of domestic bonds with a 5-years maturity.
July 18
USA: Bank Reserve Settlement
USA: MBA Purchase Applications
USA: CPI June
USA: Housing Starts June
USA: Building permits June
USA: EIA Petroleum Status Report 07/13
July 19
USA: Jobless Claims 07/14
USA: Leading Indicators June
USA: EIA Natural Gas Report 07/13
USA: Philadelphia Fed Survey July
USA: FOMC Minutes
ISSUES: Motorostroitel-Finance to sell RUB 1 bio of domestic bonds with a 3-years maturity and a put option from par in the middle of the 2-year.
ISSUES: LSR-Invest to sell RUB 3 bio of domestic bonds with a 4-years maturity and a put option from par at the end of the 2-year.
ISSUES: Russia Bank to sell RUB 1,5 bio of domestic bonds with a 3-years maturity and a put option from par at the end of the 1-year.
July 20
ISSUES: Stroytransgaz to sell RUB 5 bio of domestic bonds with a 5-years maturity.
Sources: The Central Bank of Russia, Reuters, Cbonds, Ministry of Finance
RTS
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