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RTS Does It Again
The RTS index set a new record yesterday with 1824.6 points. Primary credit for this achievement is going to foreign investors. However, Russian investment fund manager could join the bandwagon. Their bonuses depend on those high yearend market indicators.
The Russian stock market hit a new record high when the RTS crossed the 1800-point mark for the first time to reach 1824.6. Capitalization of Russian companies reached $912 billion on the RTS. The previous record of 1795 points was set on May 10 of this year and held almost six months. Those six months were quite dramatic for the market. Almost immediately after breaking the previous record, the market lost 25 percent. Then it rolled back to the level of the beginning of the year. For the last three months, the situation on the market has been extremely unstable and only at the end of September were traders able to claim steady growth of quotations again.
It took two days to set the new record as the market hovered close to the top. The sharp upturn yesterday (by 1.52 percent compared with Monday) was largely ascribable to the stock of a single issuer, Surgutneftegaz. Common and privileged stock in that oil company added almost as much to the index as everything else combines (14.522 point from a total of 29.97).
Quotations on Surgutneftegaz stock rose 7.5 and 5.8 percent respectively. A Deutsche UFG analysis of the expected acquisition of Surgutneftegaz by Rosneft sparked the interest in its stock. Rosneft stock rose in price by 2.1 percent, adding 2.05 points to the index. Analysts say that much of the growth that was provoked is due to the desire of portfolio managers to show high results for their work before New Years bonuses are given out. “To a certain degree, the desire of trading participants to show a profit at the end of the financial year and thus receive a bonus influences growth,” noted head of the market analysis department of the Bank of Moscow Vladimir Veleneev. Alfa bank sales manager Kirill Surikov also noted that “a factor that will force investors in a company to push the market up is yearend bonuses. Everyone wants one and the size of the bonus depends on results. Therefore, everyone tries to show a maximum.”
Another factor seen in yesterday's rally was the money of nonresidents. Kommersant estimates, bases on data from Investfunds and Emerging Portfolio Fund Research, that the influx of cash from foreign funds onto the Russian market at the beginning of the year exceeded investments in Russian mutual investment trusts by four to six times. In May and June, foreign investors flocked out of developing markets and it was the money of Russian investors that kept the market from a deeper fall than it had. The return of foreigners in recent days has led to a new record on the RTS. “The growth of quotes last week was caused by the significant influx of money from foreigner funds onto the market and marked the beginning of the Christmas rally,” IFK Metropol sales manager Natalia Terekhova thought. The sharp rise in trading volume also points to that. The average per day was $110 million, whereas a month earlier it had been $40 million.
Chances remain for the rally to continue. Analysts say that a number of fundamental factors hold growth reserves for the market. “After the increase of Russia's share in the MSCI due to Gazprom, the rebalancing of funds' portfolios at the end of August amounted to $15 billion,” noted Renaissance Capital analyst Ovanes Oganesyan. “At the end of November that was reduced to $8 billion and, in the absence of high political risks, that money will enter the stock market in the near future, thus guaranteeing its growth.”
Vitaly Gaidaev, Alexey Lampsi
All the Article in Russian as of Dec. 06, 2006
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