higher rates of price growth for services in 2002 This allows reckoning there is a firm tendency to vs. 2001 (14.5% vs. 12.9%), while prices for food decline in inflation rates in comparison with the last stuffs and non-food goods grew at a slower pace. year.
Consumer Price Index in 2001 and 1,1% 0,9% 0,7% 0,5% 0,3% 0,1% -0,1% As predicted in the previous monthly reports, in of a seasonal pattern of the RF trade balance and April 2002 the supply of foreign exchange to the higher oil prices. This fact enabled the Russian domestic forex market grew substantially because Central Bank to speed up accumulation of foreign % a week 1-7.1.8-14.4.5-11.3.7-13.5.9-15.7.1-7.10.3-9.12.4-10.2.22-28.1.12-18.2.16-22.4.18-24.6.20-26.8.10-16.9.18-184.108.40.206-220.127.116.11-18.104.22.168-22.214.171.124-5.8.22-28.10.12-18.11.24-30.12.14-20.01.reserves (see Fig. 2). Over the last two months The Bank of Russia’s purchase of foreign (since mid-February 2002) the reserves boosted by exchange led to a proportional increase in money $2.2 billion, i.e. by 6.1%. By April 20 the CBR supply (see Fig. 2). For the first three weeks of foreign reserves reached $38.4 billion, which is at April 2002 the narrow monetary base went up by just $400 million less than the historical maximum 34.2 billion roubles, or by 5.1%. Hence, for the first registered in October 2001. time in 2002 the monetary base exceeded its level on December 31, 2001 (by 1.2%).
Dynamics of Monetary Base and Foreign Reserves of the RCB in the second half of 2001 and 720 39,38,38,37,37,36,36,Monetary Base (bln. rub.) 35,Foreign Reserves (bln. doll.) 590 35,In April 2002 one observed several events policy and to stabilise the exchange rate of the having an immediate impact on the Russian Russian national currency, and second, speculators monetary policy. On April 1 the RF Supreme Court would enjoy greater opportunities to attack the satisfied the lawsuit filed by the Moscow Stock rouble exchange rate and destabilise the market.
Exchange on recognition of the CBR’s ruling on Third, there would be a room for different schemes compulsory sale of foreign exchange revenues by of fictitious sale of revenues by exporters to exporters exclusively at authorised trade floor (in affiliated banks on the inter-bank market or on fact, at the unified trade session on the MICEX) small exchanges.
contradictory to the Russian legislation. Should the From April 9 the Bank of Russia, for the first Supreme Court’s verdict would come in force, time since November 2000, has lowered its exporters will be allowed to sell foreign exchange refinancing rate. The new rate is set at 23% within the compulsory sale rate (50%) at any annualised, i.e. at the lowest level since November exchange that bears the license on forex trades as 1997. The CBR’s decision is mainly a signal aimed well as on the inter-bank market. In our view, at forming of expectations on further decline in economic consequences of the decision will be inflation rate and interest rates in the economy, rather negative. The single positive result in this since in reality the refinancing of commercial banks regard would become the end of the MICEX is still out of practice, and the current interest rates monopoly for such operations and, consequently, on credits and government securities are below the lower transaction costs for all market participants ( given level.
primarily due to reduction in exchange fee)3. At the The third important event was the RF Pension same time, the liquidation of the unified foreign Fund’s entering the domestic government debt exchange market, first, would decrease ability of market. Specifically, the Fund made some the Bank of Russia to implement its exchange rate billion rouble-worth purchase on the primary auctions GKOs and OFZs, thus it formed the most of demand for securities. Such a big institutional At this point we omit the legal aspect - an evident need investor will help increase liquidity in the GKOfor elimination of all contradictions in the Russian law bln. dollars bln. rubles 2-8.7.8-14.4.3-9.12.16-22.7.13-19.8.10-16.9.24-30.9.8-14.10.5-11.11.11-17.2.11-17.3.25-126.96.36.199-188.8.131.52-184.108.40.206-3.3.22-28.10.19-25.11.17-23.12.14-20.01.28.01-3.02.31.12.01-6.1.OFZ market and lower in yields on government the CBR) are to be considered as a sterilisation tool securities. In addition, the funds invested by the for increase in money supply due the Bank of Pension Fund in the government securities Russia’s accumulation of foreign reserves by in the (providing they are purchased from the Bank of forex market.
Russia on the secondary market or the RF Ministry of Finance place auction revenues on its account in Financial Markets The market for government securities. markets as a whole (the permanent crisis in In April 2002 there were contradictory Argentina now has, in fact, no impact on other tendencies noted in the market for the Russian emerging markets). However, we should bear in foreign debt (see Figs. 1 and 2). The yields on mind that presently the Russian securities have a eurobonds continued their decline over the whole minimum spread relative to the US bonds among month and hit their historical bottom levels, while countries with a similar risk and next upgrade of the quotations of Minfin bonds pursued in an opposite RF rating would unlikely to result in a new direction. After their sharp downfall in the very substantial decrease in yields.
beginning of the month, the yields on the 4th and Interesting, the market still retains a high default 6th issues of Minfin bonds, have stabilised at the premium on Minfin bonds (liabilities of the former level of 6% and 9% annualised, respectively. At the USSR) against the Russian eurobonds. Specifically, same time, the prices of the 5th and 7th issues the yield rate on the 4th issue of Minfin bonds remained at the level noted in March or slid. The (maturity on May 14, 2003) is at 1.5 percentage dynamics of the Russian liabilities is explained points higher than the yield rate on the eurobonds mainly by the absence of any important news from matured on June 10, 2003.
Russia and rather a calm situation in emerging FIGURE 1.
Minfin bonds' yields to maturity in January through April 13% Tranche 4 Tranche 5 Tranche 6 Tranche 12% 11% 10% 9% 8% 7% 6% 5% 03.01.09.01.14.01.17.01.22.01.25.01.30.01.04.02.07.02.12.02.15.02.20.02.26.02.01.03.06.03.12.03.15.03.20.03.25.03.28.03.03.04.08.04.11.04.16.04.19.04.FIGURE 2.
Yields to maturity of the Russian eurobonds w ith maturity in 2003, 2007 and 2028 in January through April 11,5% 11,0% 10,5% 10,0% 9,5% 9,0% 8,5% 8,0% 7,5% 7,0% 6,5% 6,0% 5,5% 5,0% 4,5% 4,0% USD-2003 USD-2007 USD-FIGURE 3.
The total volume of trading ($) The RTS Index In April 2002 the market for the Russian mainly by active policy of the RF Ministry of domestic debt was unstable, with growing yields on Finance in the secondary market (placement of securities and high variation of trade volume additional issues). It is very likely that likewise the between sessions. The current weekly average- results of the auction held on April 3, a part of weighted GKO-OFZ yields are within the range of additionally issued GKOs and OFZs was purchased 16.5% to 17.5% annualised, i.e. the same as in July by the RF Pension Fund.
and August 2001. A high trade volume appeared The market for corporate securities.
abnormal when compared with past months (up to The situation in the market. In April the RTS 10 billion roubles in April), which is explained Index grew by 43.19 points (12.31%), while the 03.01.09.01.14.01.17.01.22.01.25.01.30.01.04.02.07.02.12.02.15.02.20.02.26.02.01.03.06.03.12.03.15.03.20.03.25.03.28.03.03.04.08.04.11.04.16.04.19.04.points mln US dollars 01.03.30.03.27.04.30.05.28.06.26.07.23.08.20.09.220.127.116.11.17.12.17.01.14.02.18.03.15.04.trade volume exceeded $426 million (higher than in (21.29%) and “YUKOS” (17.00%). At the bottom March). The daily average trade volume topped of the list were stocks of “Sibneft” (7.40%), $21.3 million. The highest turnover was fixed on “Surgutneftegaz” (3.94%) and “Mosenergo” April 18 ( $34.8 million). The month started with a (1.34%). It was just the stock of the RAO “UES fall in the Index – on April 3 the RTS Index went Russia” that proved to be the sole memeber of the down to the lowest level over April – 339.79 points blue chips group that broke the common tendency (-3.12% against the close value in March). and fell consequently by 4.44%. Investors still Consequently the market showed a permanent were interested in the “second echelon” stocks of growth and ended up with the four-year peak value oil companies. In April attention was paid mostly of 393.94(The previous highest value of the RTS to stocks of “Orenburgneft”, “Megionneftegaz”, Index was noted on January 6, 1998 - 410.04.). “Ufaorgsintez” and “Kazanorgsintez”. The interest The leaders among blue chips (over the four in small oil companies is quite understandable, weeks of April) were: Gazprom (31.76%) and given the continuous consolidation in the Russian Sberbank (26.18%), followed by “Tatneft” oil and gas industry.
Dynamics of the Russian Blue Chips between March 29 to April 26, 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Change in price (%) In April, the share of common stocks of the RTS data): “Gazprom” – $22.7 billion, “LUKoil” in the total RTS turnover grew up to “YUKOS” – $22.3 billion, “LUKoil” – $15.24.45% (in March – 17.73%), the share of RAO billion, “Surgutneftegas” – $13.9 billion and “UES Russia” stocks dropped to 22.47% (22.84%), “Sibneft” – $8.8 billion.
“Tatneft” stocks - 8.35% (10.80%), In the first quarter of 2002, the RTS turnover “Surgutneftegas” – 8.24% (8.29%), “YUKOS” – amounted to $1.25 billion, i.e. at 22% higher than 7.16% (8.48%). Overall in April the total share of the respective indicator over the fourth quarter of the five most liquid stocks in RTS rose up to 2001 ($1.03 billion). The daily average trade 70.67% (in March – 68.14%). volume in the RTS grew by 31.2 % up to $For the period between April 1 to April 26, 2002, million (in the 4Q2001 – $16 million). The market the trade volume with “Gazprom” stocks via the participants stroke 14.8 thousand deals with RTS terminals exceeded $115 million (over 135 “Gazprom” stocks (in the System of Guaranteed million stocks). 8.7 thousand deals were stricken Quotations), i.e. 44% higher than in the 4th quarter with the gas monopoly’s stocks. of 2001 (10.3 thousand deals). Between January In April the Top-5 biggest Russian corporations to March 29 the trade volume made up 5.09 million in terms of market capitalisation are (according to roubles (254 millions shares) and was 39.4% higher t t s a a o il f f a g e e si kel om om g kos s i n n r Ko t u ussi b te U ek l rN ef Ta Si R R azp LU te n S s G No of o ut Mosener k g K R r UE M O ban Su G er RA Sb than in the last quarter of 2001 (3.65 million $/bbl, the OPEC oil basket was traded at about roubles, 260.5 million shares). The daily average $/bbl. The market tended to restore its position turnover in the 1st quarter of 2002 grew by 1.5 noted prior to September 11, 2001. In mid-April, times up to 86.3 million roubles (57 million roubles the coup attempt against President Ugo Chaves of in the fourth quarter of 2001). Venezuela and statement made by the local oil state In April the trade activity in the FORTS market monopoly PDVSA -about the countrynot following also went up. On April 19 new historical records the OPEC quotes and pursuing the country’s own were broken, with over 2.2 thousand deals worth a economic profitability considerations in the oil total of 576.82 million roubles (102.78 thousand export are turned the market down by 3$/bbl.
contracts), the market open interest amounted to 1.1 However the return of Ugo Chaves and a new billion roubles (146.46 thousand contracts). Overall intensification of conflict between Arabs and Israel over the first three weeks of April the trade volume fuelled a new rise in oil prices. By the end of the in the FORTS made up 6.46 billion roubles (28.75 month the price for Brent once again hit the level of thousand deals, 1.18 million contracts). 26 $/bbl, and the price for OPEC oil basket –f In the first quarter of 2002. 93 thousand deals 25$/bbl.
were stricken on the FORTS market accounted for Eurostat reported the share of OPEC in the worth a total of 18.4 billion roubles, 1443 thousand European oil market declined by 10 percentage contracts. On March 29 the total open interest points to 45% over last six years. The main reason reached 798 million roubles and grew by 1.5 times for the fall in the OPEC share in the region was a over the 1st quarter (514 million roubles on growing oil export from Russia and the CIS December 29, 2001). countries.
External factors having impact on the Russian The IMF revised its forecast of oil prices in stock market. In the very beginning of April the 2002. The average oil price in the world market is international oil prices continued to grow expected at the level of 23$/bbl, i.e. at 18.4%. It was concerns arising about possible reduction higher than forecasted earlier. The main reasons in oil supply because of permanent tension between underlying the new forecast are: improvement in Israel and Palestine as well as suspension of Iraqi the world economy’s performance and the OPEC’s oil export on April 8 after the embargo on oil efforts to reduce oil exports. However, the expected supply to Israel’s allies that contributed to a price average level of oil prices this year is at 5.3% rise in the market. The price for Brent exceeded 26 below the level of 2001.
Dynamics of Brent Oil in the USA (NYMEX) 01.03.01 05.04.01 07.05.01 04.06.01 09.07.01 09.08.01 11.09.01 12.10.01 15.11.01 18.12.01 28.01.02 06.03.02 10.04.President Putin’s visit to Germany resulted in securities. That was also fuelled by a successful foreign investors’ increasing interest in Russian solution of the problem of the Soviet debt to the dollars per barrel former GDR that had long been one of the most The most of the European stock indices also difficult issues in the Russian-German relations. dropped by 1% to 3.5%.
Eventually the Russian side agreed to pay the On April 15 the international rating agency Soviet debt to the GDR, but the sum of debt was s Moody’s upgraded the forecast of the Russian reduced substantially (from $6.4 billion to 500 credit rating from “stable” to “positive”. The million euros). highest rating for Russia is now set at the level of The main stock indices in the USA went down in Ba3.