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( ) 2002 - 2003 1015 925 915 825 (. .) (. $) According to data furnished by the Ministry of Finance of the Russian Federation, in June the volume of payments in relation to the foreign national debt amounted to 2,096.7 mil USD, including 1,667.9 mil USD for debt repayment and 428.8 mil USD for debt servicing. In June, 1.25 billion USD was allocated for redemption of Eurobonds and 352.8 mil USD for payment of interest thereon. In June, the total volume of payments of the Russian Federation under its debt to official creditor-countries, banks and companies amounted to 302.5 mil USD, including 235.8 mil USD for repayment of the debt and 66.7 mil USD for payment of interest thereon. Under its debt to international financial institutions, Russia paid in June 191.mil USD, including 182.1 mil USD for repayment of the debt and 9.3 million USD of interest thereon. On June 10, the last coupon of Russian Eurobonds (issued in 1998 with the total nominal volume of 1.25 billion USD) was redeemed.

. . 3-9.02.3-9.03.16-22.9.9-15.12.6-12.01.9-15.06.14-20.10.11-17.11.23-29.12.20-26.01.17-23.02.17-23.03.14-20.04.12-18.05.30.9-6.10.28.10-3.11.25.11-1.12.31.03-6.04.28.04-4.05.26.05-1.06.In May 2003, the total volume of papers placed on Stock-Exchange Modified REPO (SEM REPO) terms amounted to 73.9 billion rubles, which was 50 percent less than the previous month. It is to be noted that at four out of five SEM REPO papers auctions demand in such papers as were sold on REPO terms from the Russian Central Banks portfolio considerably exceeded the supply. The highest demand was in papers with maturity terms of three months. At the auctions, between 52 percent and 97 percent of securities offered were placed.

In May 2003, the Bank of Russia announced its intention to extend the term of borrowing of funds from banks for the purpose of ensuring more effective sterilization of excessive ruble liquidity. On May 29, 2003, the Central Bank of the Russian Federation held an auction of three-month deposits with credit institutions, which are residents of the Russian Federation. According to the resolution of May 27, 2003 of the Monetary Committee of the Central Bank of Russia, the cut-off rate at the auction of three-month deposits should not exceed 9 percent per annum. On May 30, the Board of Directors of the Central Bank of Russia approved limits on reverse REPO operations (that is, sale of bonds to banks on conditions of obligatory repurchase thereof) for a term of six months.

On June 21, 2003 the Bank of Russia set a rate of refinancing of 16 percent per annum. According to the Department of Foreign and Public Relations of the Central Bank of Russia, that was in accordance with a decision taken by the Board of Directors of the Bank of Russia. It is also to be noted that starting from June 21, 2003 the interest rate on overnight settlement credit was set at 16 percent per annum.

P. Trunin Financial Markets Public Securities Market In the first two and a half weeks of June 2003, prices of Russian hard-currency bonds continued to grow:

the prices of Eurobonds reached new historical highs. For instance, on June 16 the yield to maturity of RUS9 went down to 6.54 percent per annum, and of RUS-28, to 6.29 percent per annum. The rise in prices of Russian bonds can partially be explained by expectations of reduction of interest rates in the US. Later, by June 20, a certain adjustment of prices was observed on the market with the prices of most types of bonds going down a little. In particular, as of June 20, yields of Russian bonds were as follows: 7th OVVZ tranche, 5.41 percent; 5th OVVZ tranche, 4.84 percent; RUS-28, 6.70 percent; RUS-30, 6.88 percent; RUS-18, 6.percent.

Chart 1. OVVZs Yield to Maturity in March-June - 2003 5 6 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 03.03.12.03.20.03.28.03.07.04.15.04.28.04.12.05.20.05.29.05.06.06.18.06.On June 10, the Ministry of Finance of the Russian Federation fully redeemed the Eurobond issue of the Russian Federation issued in June 1998 in the amount of 1.25 billion USD.

Chart 2. Yield to Maturity of Russian Eurobonds Maturing in 2003, 2007 and 2028 in March-June 2003, 2007 2028 . - 2003 10.5% 9.5% 8.5% 7.5% 6.5% 5.5% 4.5% 3.5% 2.5% 1.5% USD-2030 USD-2007 USD-In the June 2-6 period, a certain drop in prices was observed on the Russian public bond market, which was accompanied by a record-high volume of sales. The average volume of secondary sales amounted to billion rubles. In just one day, on June 11, deals worth 19.6 billion rubles were transacted, with sale of securities placed under modified exchange REPOs accounting for 15.6 billion rubles of that amount. The total volume of sales in the June 2-21, 2003 period amounted to 71.7 billion rubles. The drop in prices on the domestic government bonds market can be explained by cash outflow to the stock market, whose attractiveness grew in the month under review.

The first week of June saw several placements of GKO-OFZ securities. In particular, on June 4 an auction was held for placement of an additional issue of OFZ-AD 46014 with maturity on August 29, 2018 and nominal value of 9 billion rubles. The nominal demand amounted to 8.43 billion rubles, while the amount of placement, to 5.3 billion rubles. The cutoff price was set at 109.532% (income of 7.74 percent per annum).

The same day, placement was carried out of an additional OFZ-FD 27023 issue with a nominal of 7 billion rubles and maturity on July 20, 2005. The cutoff price was set at 103.05% (yield to maturity of 6.67 percent per annum). The demand amounted to 6.5 billion rubles, the volume of placement, to 6 billion rubles. As of June 21, duration of the market portfolio amounted to 868.16 days.

Corporate Securities Market The market situation. Throughout June, stock prices were steadily growing on the Russian stock market.

In the period from May 30 to June 27, the RTS Index rose by 32.19 points (which was a 7-percent increase).

In June, that index reached another post-crisis maximum of 502.11 points4 (closing of trades on June 25), while trading volumes in the above period amounted to 424.5 mil USD. The average daily volume amounted to 22.3 mil USD, which is four mil USD less than the May 2003 figure (26.4 mil USD). The maximum daily trade volume (34.241 mil USD) was registered on June 9, while the minimum daily trade volume (15.52 mil USD), on June 5. Throughout the first week of June, the RTS Index grew to the level of 467.06 points (Friday, June 6). On June 9, the index rose by 2.43 points, however, within the following two days (which preceded a national holiday) it fell to the level of 464.83 points. After the holiday, the index grew sharply The last time the index reached a higher level was on October 27, 1997.

03.03.12.03.20.03.28.03.07.04.15.04.28.04.12.05.20.05.29.05.06.06.18.06.and on June 17 reached the level of 495.50 points. In the next few trading days, the index fell somewhat and on June 21 it was at the level of 491.78 points. However, at the end of the month the growth resumed and the index reached a psychologically important level of 500 points.

Chart 90 500. ($) 450.60 400.350.30 300.250.200.In the period of from May 30 to June 27, the highest growth in prices was observed with shares of the GMK Norilsk Nickel, which yielded in that period 30.96 percent, as against 11.63 percent in May. Among the factors behind that swift growth in those shares prices were acquisition by the Norilsk Nickel of Stillwater, a US-based company (see below) and better than expected 2002 business results of the Norilsk Nickel. The rates of growth in prices of oil companies shares were lower, but they were much higher than in May. For example, Yukos shares appreciated in value by 13.57 percent, as against 6.25 percent in May, LUKoil shares, by 11.59 percent, as against 1.84 percent in May and Sibneft shares, by 9.87 percent, as against 1.55 percent in May. In June, prices of Surgutneftegas shares rose by a mere 1.02 percent. The only exception among oil companies (from the group of so-called blue chips) was Tatneft; its shares in the above period fell in value by 16.38 percent, which is the steepest downturn in prices among the more liquid shares. It is to be remembered that previously shares of Tatneft had demonstrated the highest rates of price growth (27.47 percent).

Throughout June, strategic buying in of shares of power generation companies was observed, since those shares are likely to become the principal means of acquisition of shares in generating companies to be established in future. In particular, shares of the RAO UES appreciated in value by 7.98 percent and shares of Mosenergo, by 3.44 percent.

In the period under review, shares of the Savings Bank of Russia grew by 3 percent, while shares of Rostelecom fell in value by 5.9 percent (in May, income related to fluctuations of the above shares prices amounted to 19.2 percent and 30.14 percent, respectively). In the case of Rostelecom, it is likely that prices of its shares were affected by the Companys poor 2002 financial results.

. 06.05.04.06.03.07.31.07.28.08.25.09.23.10.21.11.20.12.22.01.19.02.21.03.18.04.21.05.20.06.Chart 27 2003 2003 . 26 2003 .

35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% (%) In June, shares of the RAO UES retained their leading position in the volume of trade; deals with shares of that power generation holding accounted for 34.59 percent of the total volume of trades, as against 41.percent in May. Rating second and third in the volume of trades were, respectively, shares of LUKoil (17.percent, as against 12.71 percent in May) and shares of Yukos (10.76 percent, as against 9.95 percent in May). In June, shares of the Norilsk Nickel and Tatneft accounted for 8.51 percent and 8.06 percent of the total trading volume, respectively. In the June 2-27 period, the aggregate share of the five most liquid papers accounted for 79.36 percent of the total RTS volume, which is somewhat lower than the May 2003 figure (82.33 percent).

As of June 27, according to RTS data, the five largest issuers as regards capitalization were as follows:

Yukos (31.1 billion USD), LUKoil (16.7 billion USD), Surgutneftegas (14.9 billion USD), Sibneft (12.billion USD) and the GMK Norilsk Nickel (7.2 billion USD).

Forward market. In the June 2-27 period, the volume of trading in FORTS forward contracts amounted to 17.3 billion rubles (58 thousand deals and 2.5 million contracts), of which futures contracts accounted for 16.25 billion rubles. The maximum trading volume was observed on June 10 (1,438 billion rubles), while the minimum trading volume (503.78 mil rubles) on the forward market, on June 27.

Exogenous factors of the dynamics of the Russian stock market. Throughout June, prices of oil on the international market continued to grow. Growth in oil prices was observed in the first week of June; by June 9, oil prices reached a three-month high of 28.85 USD/barrel (Brent oil). The major, fundamental factors behind the growth in oil prices were fluctuations of reserves of petroleum products, particularly, gasoline in the USA, and market expectations of reduction by the OPEC of oil production quotas. However, the decision to leave the export quotas of the cartels member-states unchanged (which decision was taken at an OPEC summit on June 11) was followed by a drop in oil prices to 27.51 USD/barrel (by June 16). The summit participants motivated that decision by lingering uncertainty in respect of the timing of resumption of supplies of the Iraqi oil to the market and the fact that there was no danger of overproduction of oil at the moment. It is to be noted that a statement made by the International Energy Agency (IEA) also contributed to adjustment of oil prices. According to that statement, oil reserves of the more industrialized countries were somewhat larger (by 79 mil barrels) than previously believed. In the following few days, a small price adjustment was observed and by June 21 oil prices amounted to 26.07 USD/barrel.

Chart Brent, (NYMEX) In future, growth in oil prices can be related to the results of the preliminary forecasts by experts from the IEA and the American Petroleum Institute (API). According to the former forecast, crude oil reserves in the USA dropped by four mil tons, while according to the latter, by nine mil tons. In addition to that, news came of possible industrial action in Nigeria where negotiations between the oil industry trade unions and the government had failed to resolve the dispute. Those factors contributed to growth in prices of crude oil; on June 27, the price of Brent oil on the international market amounted to 27.06 USD/barrel.

Chart 150% Dow Jones Industrial Average Nasdaq Composite 130% 110% 90% 70% 50% In June, positive trends were observed on the international stock markets.

In particular, the Dow Jones Industrial Average grew from the beginning of the month by 3.0 percent and from the beginning of the year, by 6.89 percent, while NASDAQ, by 3.30 percent and 18.77 percent, respectively. Growth of the major stock market indices was also observed with European stock markets. For example, the FTSE 100 (the UK) grew in a month (year) by 0.75 percent (3.76 percent), the DAX 06.05.07.06.10.07.08.08.13.09.16.10.19.11.23.12.31.01.05.03.07.04.16.05.19.06.06.05.29.06.22.08.15.10.08.12.31.01.26.03.19.05.(Germany), by 5.69 percent (4.31 percent) and the CAC-40 (France), by 4.65 percent (-0.15 percent). At the same time, negative rates of growth were observed with stock markets of some developing countries: the Bovespa Index in Brazil fell by 0.74 percent, while the ISE National-100 in Turkey, by 6.87 percent. Despite that, however, in June stock markets of developing countries, on the whole, were characterized by sustained growth, which was evidenced by a 5.26 percent increase of the Emerging Markets Free Index of the Morgan Stanley Capital International.

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