Vacation Prices
// Stock Market
In spite of the traditional summer lull, this week may be a good time for private investors to reexamine their portfolios. The stock market presents special interest, since both a sharp rise and a sharp fall are possible on it in the immediate future.
Analysts are not expecting anything good from the stock market this week. They say it will not rise because of the vacation season, but may begin to fall, if there is new bad news about YUKOS or from across the ocean from the US Federal Reserve System (FRS). Experts advise using those key moments for the purchase of securities.
Soyuz Bank economist Aleksey Podstavkin comments, “The contradictory news about YUKOS has prevented the stock market from rising and has made it extremely volatile. That nervousness will remain until events surrounding YUKOS calm down. Extrapolating from that, it might be said that the market is at very interesting levels for buying. Among promising securities can be noted LUKOIL, Norilsk Nickel and Mosenergo; there is a great demand for them on the market.”
Head of the Zerich Capital Management analytical department Nikolay Podlevskikh says, “The situation with the YUKOS Company is going from bad to worse, and coming close to its sad finale. Last Thursday, bailiffs disavowed the statement made by YUKOS on Wednesday that the company had received permission to use seized funds to underwrite continuing operations. The transfer of $900 million from its accounts led the company on Friday to announce that it was unable to keep up its payments. YUKOS is even overshadowing the main event on the world financial scene. On August 10, the next meeting of the FRS will take place. It is expected that a raise in the interest rate will be approved at that meeting. A sharp raise in that rate would be most dangerous for the Russian stock market. Therefore, market players will be watching for news from that meeting.”
VEO Otkrytie analyst Denis Pryanichnikov said, “The next level of index support on the RTS will be 525-520 points; when it reaches that level, the market will probably begin to consolidate and then there will possibly be a correction to 540-550 points. If there is negative news from YUKOS in the middle of the week, the fall could continue to 500-485 points. An increase in volume is not to be expected, since it is the height of vacation season on the market. Attention on the market will be riveted to the FRS meeting on Tuesday. It is entirely likely that they will raise the discount rate to 1.75%, which will have a negative effect on the American stock market and affect the Russian stock market as well.”
Experts also note that the fundamental causes of growth on the Russian market have not gone away and that the price level of oil determines its long-term perspectives. Financial Bridge analyst Stanislav Kleshchev said, “To sit on your cash and wait for the final breakup of YUKOS makes no sense. The record oil prices say a lot lately as they leap ever higher. The Russian stock market, which is directly dependent on that indicator, has practically not reacted to it. Nonetheless, it would not be bad to remember that the increasing flow of oil dollars into the country is a growing money supply that could push stocks down. The liveliness now beginning at the second echelon of stocks can be taken as the first sign of a turnaround on the market.”
Note that an additional stimulus for the Russian market this week may be news about the reversal of the seizure of the stock of Yuganskneftegaz, the main YUKOS production arm. This happened late Friday evening and was shortly thereafter ignored by the experts questioned by Kommersant. Even though flashes of investor activity have happened more than once in the last half a year, and have always ended in a new price collapse, there is no doubt that speculators will begin playing on a YUKOS rise.
On the ruble debt market, analysts say there are no changes expected. In spite of the restoration of liquidity and calm on the Eurobond market, few experts see particular causes for growth there. Trust Investment Bank analyst Mikhail Galkin says, “Player activity will most likely continue to be concentrated on Moscow stocks and stocks of the first echelon. It is hardly likely that there will be any positive news for the market until fall. Negative news can only be connected with issuers' failure to fulfill their obligations at the maturity date of a bond, but there will be no significant maturations next week.”
Trinfico Investment Company director Egor Krotkov says, “On one hand, it's the vacation period. On the other, tension on the market has eased up, liquidity is higher, there should be some demand. Demand will mainly be for securities of the first and second echelon and liquid issues of government securities below the federal level. But there will be no strong price growth. That will be stopped by the large quantity of delayed emissions.” Head of the analytical division of Nomos-Bank Ilya Buchkovsky says, “This week, the situation will be characterized by a tendency toward smooth growth in prices. The likely increase in the discount rate by the FRS by 0.25% will have a limited negative effect on the Russian market for Eurosecurities, but its effects on the ruble debt market, which has been leading a life of its own lately, will be minimal. The tendency for quotes on the ruble debt market to grow in the presence of excess liquidity has been hindered lately by the tendency of the ruble exchange rate to weaken as it heads toward the 29.50-30 rubles/dollar mark set by the Central Bank for the end of the year. In the situation developing, investors will beware of investing in long-term instruments, and the continuing negative influence of the recent interbank crisis will still keep them away from paper of the third echelon with worries about the ability of some issuers to find the funds to meet their obligations.”
Renaissance Capital analyst Anna Matveeva sees influence in the middle of August coming from a new placement of stock by Tsentrtelekom. That will be its fourth issue of significant size. The issuer has announced that it is ready to pay a premium. Investors will begin to get ready for the upcoming auction and free up funds from second-echelon paper of similar quality, thus applying slight pressure on the market.” In her opinion, investors would do well to make up their portfolios of half first-echelon paper, and half of second-echelon securities with good premiums, such as Sibirtelekom-2, URSI-3 or YUTK-2. Buchkovsky is in favor of a similar strategy: “The necessity of investing free funds does not force conservative investors into only obtaining middle-term paper of the first echelon, like Gazprom-2, ALROSA-19, RAO UES of Russia, Moskva-32, VTB-4, but also allows them telecom securities that approach that quality. The expected narrowing of spreads provides a foundation for the recommendation that speculative investors form their portfolios from comparatively reliable securities of the second and third echelons with maturity or offers of up to a year (Polimetall, Baltimor, Glavmosstroy, SU-155 and PIT).”
Yuliya Chaikina, Petr Rushailo
All the Article in Russian as of Aug. 09, 2004
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