Russian President Vladimir says he could become the prime minister some time in the future.
Photo: Dmitry Azarov
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Non-Residents Follow President
// Russian stock indices reach all-time highs
Foreign investors are flocking back to the Russian market after a lengthy break caused by the global liquidity crunch. Foreign funds have taken the sweep of Russian stocks sending the RTS benchmark to record highs to surpass the 2,100 points threshold. The market woke up in a reaction to President Vladimir Putin’s promise to head the United Russia’s party list for the parliamentary election, which was widely considered as a sign for lower political risks. Russian investors, however, are more wary and in no hurry to buy up stocks now.
Tuesday’s bidding on Russian trading floors saw a buoyant growth. The RTS benchmark closed up 3 percent with the all-time high of 2,108.57 points, beating the previous record of 2,092.71 points set on July 23. The MICEX index gained even more, climbing 3.56 percent to 1,795.06 points. This stock exchange, however, did not set a new record due to a strong ruble as all calculations at the MICEX are carried out in rubles, unlike the RTS with its U.S. dollar calculations. “The U.S. dollar has recently dropped against the ruble, that’s why the MICEX failed to reach a new all-time high,” Andrey Kilin, manager at Alfa Capital, says. Trading volume at the exchanges was also high, coming to $98 million at the RTS, twice as much as a day earlier. Investors were particularly active buying up Russian blue chips. Norilsk Nickel and Sberbank’s privileged stocks were top gainers, adding 5.9 and 5.56 percent, respectively.
The aggressive buy-up of Russian stocks was led by foreign investors. “The inflow of overseas investments was particularly strong in Gazprom and Sberbank’s stocks,” Alexey Golubykh, trader of the Troika Dialog investment firm, says. During the crisis, American funds which invest in developing markets cut on their presence there. “Now they are coming back,” Andrey Kilin notes.
Foreigners got a sign to buy Russian stocks from President Vladimir Putin. The market, tired of bad news, was happy to hear his statement of readiness to head United Russia’s party list at the parliamentary election on December 2. What is more, the president said he could become the Russian prime minister some time in the future. “Investors perceived the president’s statement as evidence that political uncertainty in the country is on a decline, and the succession of the existing political course will be maintained,” Yaroslav Lisovik, chief analyst at Deutsche Bank, believes. “The market was anticipating some positive news, and that’s why we had such a strong rally yesterday,” Alexey Golubukh says.
Investors were also upbeat because of stabilization on other markets. Almost all emerging markets were growing on Tuesday. Hong Kong’s Hang Seng benchmark lifted 3.9 percent, Turkey’s ISE National30 rose 1.6 percent, and Korea’s Kospi climbed 2.62 percent. A day earlier, American indices set new historic highs. Dow Jones Industrial Average jumped 1.38 percent to surpass the 14,000 threshold. “It happened after UBS and Citigroup investment banks said they are ready to cover the third quarter’s losses by profits of the fourth quarter,” says Maxim Zotov, sales manager at the Metropol investment firm. Investors appreciated the fact that financial sector’s companies started to release actual accounts on their losses caused by the U.S. mortgage crisis. “Stock exchanges are most cautious about the uncertainty of risks while clear and voluntary reports of the scale of investment banks’ losses made the investors believe that the crisis is getting to a close,” Dmitry Savchenko, analyst with BrokerCreditService, said in a recent survey.
Russian investors are still wary from investing heavily in local stocks. “The reaction of Russian players is more reserved compared to that of foreigners,” Alexander Krapivko, portflolio manager at Renaissance Investment Management, notes. Alexey Kilin agrees the market is bouncing back on foreign liquidity. He says Russian banks which were cutting their presence during the crisis are in no hurry to invest again but their return to the market may speed up the growth. Analysts are sure that Russian stock indices will reach new highs this year. According to Deutsche Bank, the RTS index may jump to 2,600 points.
Nailya Asker-zade
All the Article in Russian as of Oct. 03, 2007
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