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Russia's Assets Are the Cheapest
Political risks have made Russia’s market the cheapest in the world. The rate of the company’s capitalization to the forecasted profit is even below the values of 1998 collapse. But two factors will rescue quotes from further decline – the buyout of stocks by companies themselves and/or large-scale investments of the government.
The stock exchanges of Russia slumped 4 percent in the first trading minutes yesterday. The trend gained another momentum after 3:00 p.m., when President Dmitry Medvedev officially recognized independence of South Ossetia and Abkhazia. MICEX lost 5.8 percent and RTS fell 6.10 percent.
But the markets partially adjusted after 4:00 p.m., although there were no evident reasons for any growth. “The situation was strange, neither domestic nor positive news,” said Andrei Zokin, who is the chief investment director at Gazprombank-Asset Management. Anyway, the stock exchanges closed down between 2.09 percent and 4.16 percent.
In today’s situation, only two factors may contain the decline, the analysts speculate. The first one is if Russia’s companies set to buying back their stocks; NOVATEK and then Norilsk Nickel have made the respective statements already. As a result, the MICEX index shed 5.95 percent in two trading days, while the quotes of the metal company stepped up 0.58 percent.
The second scenario is the state support. The government apparently stepped in yesterday, and it was exactly the reason of adjustment. “The support could be rendered through the intervention of budget money by buying the assets to the balance of state banks,” said a top manager of one of the government’s banks. The turnover, which was higher than usually in time of speculative activities on the market, signaled a big player appeared there, the traders say.
Indeed, MICEX posted the sales of 54.42 billion ruble August 26 vs. 42 billion ruble of the past two-week’s average. The helping arm of the government evidently extended to Rosneft, which grew 0.66 percent, Gazprom (up 0.48 percent) and VTB (closed down 1.47 percent despite the slump of 10.5 percent during the day).
www.kommersant.com
All the Article in Russian as of Aug. 27, 2008
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