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License No CISF 064/06 of Cyprus Securities and Exchange Commission
The Russian market managed to avoid further losses yesterday, in the wake of the sharp fall on US markets on Monday. In order to calm the panicked mood of traders, the FFMS halted trading at the start of the day until 12:30 pm and also banned uncovered short selling. On the resumption of trading, the Russian markets again opened lower, but gradually started moving higher; the blue chips and in particular, state owned Gazprom (+2.6% at the close), VTB (+2%), and Sberbank (+8.7%, including a one hour break in its trading due to its extremely rapid price rise), helped the market close higher. This led market participants to conclude that the long-promised state funds had appeared on the market. This was also supported by the permission of an extra hour of trading on MICEX. The growth of the Russian market was also strengthened by the rise in oil prices (WTI oil prices rose 5.5% to $101.88, and Brent oil rose by 5.35% to $99.17 per barrel), the strong growth of European indices and the higher opening in the US. However, the futures on other commodities – excluding gold (+0.68), platinum (+2.19), and palladium (+2.27%) – dropped lower, yesterday.
Yesterday, the US markets rose by about 5%, which could be a technical bounce after Monday’s dramatic losses (amongst the most severe one day losses in the past twenty years at least) as well as due to expectations that Congress will, after all, ratify Paulson’s plan.
The Asian markets have not traded as strongly today as the European and US markets yesterday. However, this is unlikely to dampen the mood on Russian markets, which are waiting for news from the US – in particular, whether the US Congress succeeds in passing Paulson’s plan later today.
We expect Russian blue chips to continue trading higher, based on positive news from the US, the possible continued appearance of state funds on the market and the Central Bank’s statement this morning, regarding measures taken to ease conditions on Russian credit markets, as well as the ban on uncovered short selling from yesterday. We note that Polyus Gold continues to trade higher; last week, it rose strongly, even when the rest of the market was falling. Yesterday there was contrasting news concerning the company: on the one hand, the company’s Board, contrary to investor expectations, did not support the share buy back and on the other, Mikhail Prokhorov confirmed the fact that Suleiman Kerimov was about to acquire Vladimir Potanin’s stake in Polyus.
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