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Figure Dynamics of corporate bond indices 122.ZETBI-Corp ZETBI-Corp120. the same time, at the backdrop of growing tax risks associated with the investment in the largest Russian companies, the market of corporate debt entered the phase of consolidation. The mixed impacts of the forex and external factors (the US dollar appreciation and the instability observed on the market of forex denominated bonds were compensated by high levels of liquidity) accounted for the lack of clearly manifested market dynamics. In the second half of the month, the quotations of corporate bonds demonstrated a certain growth in spite of a certain deterioration of the situation as concerns liquidity in the banking sector. These developments were determined by the appreciation of the Ruble against the US dollar and the improving business situation on the market of forex denominated RF bonds. April 1 and April 26, the price index of corporate bonds traded at the MICEX9 increased by 0.29 points (by 0.26 per cent), while the index of ten most liquid corporate sector bonds increased by 0.58 points (by 0.51 per cent). In the period from April 1 till April 26, the total turnover in the bond sector of MICEX made about RUR 22.49 billion and the average daily turnover was at the level of about RUR 1.25 billion (in comparison with RUR 18.83 billion and RUR 1.176 billion registered in March). Therefore, the turnover of the trade with the corporate bonds issued by Russian companies has somewhat increased in comparison with the indicators observed in March.

External factors affecting the dynamics of the Russian stock market. In April, the overall situation observed on the world oil market remained rather favorable in spite of a certain decline in quotations. In the late March and early April, the prices reached new historical maximums. For instance, the Brent oil prices were registered at about US $ 57.8 per barrel. The factors behind so exceptionally high oil prices were the purchases carried out by large investment funds and also the analytical report presented by the Goldman Sachs. According to the report, it should be expected that the Brent oil prices will be at about US $ 105 per barrel by the end of 2007. However, later the prices began to decline. A number of factors accounted for these developments, for instance, the report presented by the International Energy Agency contained the forecast that the world demand for oil should start to decrease staring in the 3rd quarter of this year and the fact that the OPEC reportedly planned to increase its official extraction quotas. As a result, the quotations have gradually declined to the level of US $ 50 per barrel, and by the end of March the Brent oil prices were registered at about US $ 51 to US $ 52 per barrel.


120% Dow Jones Industrial Average NASDAQ Composite The RTS Index 110% 100% 90% 80% 70% In April, the situation on world stock markets somewhat deteriorated (see Table 1). The majority of stock indices of the countries of the world demonstrated negative values at the end of the month.

The dynamics of the US stock market were on the whole of negative nature. The major negative factors have still been the accelerating inflation rates, growing interest rates as concerns US government bonds, and decelerating rates of growth in corporate proceeds. On the whole, the macroeconomic The indices of corporate bonds traded at the MICEX that have been used for the calculations are calculated by Zenit Bank. demonstrated that the US economy experienced a slowdown of the rates of growth. The only positive factor for the US stock market was the decline in oil prices.

Corporate news.

The OAO LUKoil On April 26, 2005, the international rating agency Moody's Investors Service increased the basic rating of the OAO LUKoil from Ba3 to Ba2. The forecast is stable across all rankings. According to the statement by Moodys representatives, the increase in the rating primarily reflects the high production and financial results of operations conducted by the OAO LUKoil, and, in particular, a significant improvement of the efficiency of the companys operating activity, the growth in the EBITDA indicator in the first 9 months of 2004, the improvement of the corporate governance indicators, especially after the company ConocoPhillips had purchased the 7.6 per cent interests in the OAO LUKoil in September of 2004, and increased its block of shares in the company in January of 2005.

On April 27, 2005, the Board of Directors of the company approved the date of the annual meeting of shareholders of the OAO LUKoil (June 28, 2005). The Board of Directors intends to recommend the shareholders to take the decision with respect to the payment of dividends basing on the results of the companys work in 2004 in the amount of RUR 28 per ordinary share.

The OAO Mosenergo On March 31, 2005, the company published the data pertaining to the results of its financial operations in 2004. The OAO Mosenergo could increase its profits on sales two times from RUR 6.6 billion in 2003 to RUR 13.6 billion in 2004. The companys net profits made more than RUR 2 billion as compared with RUR 1.7 billion registered in 2003.

The OAO GMK Norilsk Nickel On April 15, 2005, the Board of Directors of the OAO GMK Norilsk Nickel took the decision to approve the action plan aimed at the singling out of the Russian gold mining assets consolidated within the ZAO Polyus company and its subsidiaries, as well as the 20 per cent stake in the company Gold Fields Limited. In the case this reorganization is implemented, it should result in the creation of a new large independent gold mining company having a significant potential for further growth and owning large assets in Russia.

At the preliminary stage of the reorganization, all gold mining assets of the company (including the 20 per cent interest in the company Gold Fields Limited) should be consolidated within the Polyus company. The Deutsche Bank AG London (the financial consultant) and Debevoise & Plimpton LLP (legal consultant) should advise the OAO GMK Norilsk Nickel on the issues pertaining to this reorganization.

In connection with the implementation of the said reorganization, the OAO GMK Norilsk Nickel has took the decision to increase the authorized capital of the ZAO Polyus via the additional placement of ordinary registered book entry shares by the way of closed subscription. The money received from the placement of the shares should be invested in the ZAO Polyus for the purposes of consolidation of the 20 per cent block of shares in the South African gold mining company Gold Fields Limited in accordance with the decision taken by the Board of Directors of the OAO GMK Norilsk Nickel as concerns the singling out of gold mining assets.

The RAO UES of Russia In the beginning of April of 2005, the RAO UES of Russia published its financial statement for 2004 prepared in accordance with the Russian Accounting Standards (RAS). In 2004, the earnings of the RAO UES of Russia made RUR 34.46 billion, what was by RUR 17.21 billion below the indicator registered in the preceding year (RUR 51.67 billion). The decline in the proceeds observed in the reporting period can be primarily attributed to the reduction of the amount of subscription payments by RUR 12.12 billion as a result of setting independent tariffs for companies OAO FSK UES and OAO SO-TsDU UES, as well as the transfer of the functions of the operator of export and import of electrical power to the ZAO Inter RAO UES and the cessation of sales of electrical and heat power by some subsidiaries of the RAO UES of Russia.

In 2004, the sales profits of the RAO UES of Russia made RUR 24.25 billion declining by RUR 6.57 billion in comparison with this indicator as registered in 2003 (RUR 30.81 billion). Over the period under observation, the profits before tax decreased by RUR 5.41 billion and made RUR 27.billion as compared with RUR 32.64 billion registered in 2003. In 2004, the net profits of the RAO UES of Russia made RUR 24.07 billion, what was by RUR 0.54 billion below the level registered in 2003 (RUR 24.60 billion).

Table 1.

Dynamics of international stock market indices Change within the Change since the Data as on April 27, 2005 Value month (in %)10 beginning of the year (in %) 675.11 1.99% 11.12% RTS (Russia) 10198.8 -2.46% -4.95% Dow Jones Industrial Average (USA) 1930.43 -3.00% -10.30% Nasdaq Composite (USA) 1156.38 -1.38% -3.80% S&P 500 (USA) 4789.4 -2.46% -1.19% FTSE 100 (UK) 4189.02 -2.97% -2.39% DAX-30 (Germany) 3927.68 -2.60% 1.87% CAC-40 (France) 5840.5 -1.44% 1.24% Swiss Market (Switzerland) 11005.42 -6.25% -4.45% Nikkei-225 (Japan) 25242.00 -3.83% -1.87% Bovespa (Brazil) 12454.69 -3.10% -4.36% IPC (Mexico) 1949.84 1.41% 8.57% IPSA (Chile) 2145.34 0.01% 3.63% Straits Times (Singapore) 930.16 -3.79% 4.08% Seoul Composite (South Korea) 24070.13 -1.51% -5.4% ISE National-100 (Turkey) 537.57 -1.80% -0.86% Morgan Stanley Emerging Markets Free Index The Foreign Exchange Market. In April, on the foreign exchange market there was observed the Ruble appreciation against the US dollar. In the beginning of the month, the exchange rates dynamics were characterized by opposite trends and on the whole were determined by the situation on the FOREX market. Later, the fluctuations of the exchange rate continued at the background of a certain appreciation of the US dollar at the backdrop of the publication of the news concerning the perspectives of the development of the US economy. A more sharp appreciation of the US dollar against the Ruble was impossible due to both the demand for Ruble denominated liquidity on the eve of tax payments, and the lack of external prerequisites of the US dollar appreciation on the world foreign exchange market. In the second half of the month, the US dollar demonstrated certain depreciation against the Ruble following its depreciation registered on the FOREX market; however after the publication of the news about the improvement of the situation on the US labor market this process slowed down.

In the period between April 1 and April 28, the US $ depreciated by RUR 0.05 (by 0.18 per cent) and made RUR 27.8 per US $. The aggregate volume of trade in the US Dollar at the SELT in the period from April 1 till April 25 made about US $ 25.2 billion. Over this period, the average daily turnover made US $ 1.48 billion (as compared with US $ 1.58 registered in March), what was practically at the level of the respective indicator registered in March. During the period under review, the highest volume of trade in the US Dollar, about US $ 2.83 billion, was observed on April 13; the lowest volume, US $ 989 million, was observed on April 4.

This April, the Ruble liquidity in the banking sector demonstrated a certain decrease in comparison with the figures registered in March of 2005: in April, the average balances of correspondent accounts In relation to the levels registered on March 28, 2005.

of credit organizations with the Bank of Russia made about RUR 265.3 billion as compared with RUR 296.4 billion registered in March of 2005.

Figure 7.

Dynamics of the Official USD/RUR and EUR/RUR Exchange Rates in 2004-40.Official USD/RUR exchange rate 39.Official EUR/RUR exchange rate 8.

Dynamics of the Dollar/Euro Exchange Rate on the International Markets ($ ) March, the trends towards a certain appreciation of the US $ against the Euro prevailed on the world foreign exchange market. In the beginning of the month, there were observed oppositely directed fluctuations of the exchange rate primarily as a reaction to the statements made by representatives of the monetary authorities of the USA and European Union. Thus, in the beginning of March the roubles $ began to depreciate because of the statements made by A. Greenspen to the effect that the oil reserves were sufficient and there could be expected a decline in the world oil prices, what was perceived by the market as an indication of lower risks of a sudden rise of interest rates, since the decline in oil prices could permit the US economy to develop at an acceptable rate. Somewhat later, when the European Central Bank took the decision not to raise the interest rate because of the insufficiently stable standing of the EU economy, the US dollar again appreciated somewhat.

In the period between April 1 and April 28, the exchange rate of Euro on the world market depreciated by US $ 0.003 (by 0.25 per cent) and made US $ 1.2935 per Euro. At this background, there was also observed a certain depreciation of the Euro against the Ruble. In the period from April 1 till April 28, the European currency depreciated against the Ruble by RUR 0.09 (by 0.28 per cent) from RUR 36.02 per Euro to RUR 35.92 per Euro. The aggregate turnover of trade at the SELT amounted to Euro 128.89 million in the period from April 1 till April 25, while the average daily turnover was registered at about Euro 7.58 million (Euro 8.43 million in March). These indicators were somewhat below their respective levels observed in March. Over this period, the highest volume of trade with Euro was registered on April 7 at Euro 9.95 million, and the lowest, Euro 4.78 million, was observed on April 20.

Table 2.

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