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In the period between September 1 and 27, the total secondary GKO-OFZ market turnover totaled nearly 81.2 bln rubles with the average weighted turnover being 4.77 bln rubles ( as compared to nearly 70.3 bln rubles with the average weighted turnover being 3.5 bln rubles in August ). Hence the activity in the Russian ruble government bonds virtually doubled in September as compared to August Our review is based on analytical materials and reviews made by Zenit Bank, ATON Asset Management Company, MICEX, the Central Bank of Russia, as well as official web-sites of numerous Russian corporate issuers..

2005. Two OFZP-AD placement auctions ( issues 46017 and 46018 ) were held on August 14, their issuance volume being 6 and 8 bln rubles respectively. The placement volumes were 5.92 and 7.26 bln rubles with the average weighted yields being 6.77% and 6.88% per annum respectively.

Fig. 1.

Minfin bonds' yields to maturity in July - September 6.5% Tranche 5 Tranche 6 Tranche 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% Fig. 2.

Yields to maturity of the Russian eurobonds with maturity in 2030, 2018 and 2007 in July - September 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% USD-2030 USD-2007 USD- of September 27, the GKO-OFZ market volume accounted for 673.26 bln rubles at face value and 678.2 bln rubles at the market value. Duration of the market GKO-OFZ portfolio was 1788.days.

Corporate Security Market Stock market condition.

The Russian stock market continued its vigorous growth in September owing to which the RTS index renewed its historical highest. The market grew in the beginning of the month thus following the August trend. At the same time, technical correction took place as early as the second week of the month, which was partially caused by a slight decline in prices in the world oil market. However, the growth resumed in the second half of the week, which was caused by a set of new favorable news ( conclusion of an agreement between Rosneft and a syndicate of international banks which is worth $7.5 bln US dollars ), as well as the decision of Moodys to include Russia, Gazprom, the Russian Railways, Transneft and Rosneft into the list of credit ratings to be revised for upward upgrading.

The market was characterized by an extremely volatile movement of quotations in the middle of the month: growth of prices often changed by downfall within a day. Such a mixed movement took place up to the end of the week, when oil quotations caused again the growth in demand for oil companies securities, which effected the market as a whole.

Fig. 3.

100 1 000.950.The total volume of trading ($) The RTS Index 900.850.800.750.700.650.600.550.500.450.400.350.The movement of quotations in the beginning of the second half of the month gave evidence of the fact that the market was out of abeyance and investors were oriented for further growth. Virtually every trading day was marked by new historically highest peaks that pushed the RTS index to its highest ever level of 984.52 points in the beginning of the last week of the month. Again, world oil prices, which started to grow in the supposition of an adverse affect by the Hurricane Rita on oil production and refining industries in the Gulf of Mexico, were the key growth factor. An extremely favorable news about Lukoils financial performance in the first half of 2005 also encouraged an increase in demand for oil companies securities after a single-day profit fixation by investors that occurred on Tuesday, September 20.

In the period between September 1 and 27, the RTS index grew up by 10.06% to reach 984,points, which is 89.95 points in absolute figures. The trading turnover of RTS index shares totaled points mln US dollars s $1 064.4 ml US dollars with the average weighted turnover being $56.02 ml US dollars in the same period ( about $833.8 ml US dollars with the average daily turnover of $39.7 ml US dollars in August ). Hence in spite of a holiday season, investors were far more active in September than in August 2005. Maximum and minimum trading turnover figures totaled $99.05 ml US dollars ( on September 2, 2005 ) and $25.07 ml US dollars in September ( on September 13, 2005 ) respectively, as opposed to $62.7 ml US dollars and $9.8 respectively in August.

Market value of all blue chips grew up considerably in the period between August 30 and September 27. Mosenergo shares ranked second to none in the trading list in September, its quotations jumped up by 43.29% during the month. The shares of Lukoil and RAO EES of Russia grew up at markedly slower rates during the month: by 19.44% and 18.21% respectively. The shares of Tatneft, Rostelekom, Surgutneftegaz and NorilskY Nikel grew up by ( +13.36% ), ( +12.8% ), ( +12.49% ), ( +9.99%) respectively. The shares of YUKOS ( +6.61% ), Sberbank of Russia ( +6.06% ) and Sibneft ( +3.11% ) ranked at the end of the list of growing quotations during the month in question.

Fig. 4.

Dynamics of the Russian Blue Chips from August 30 to September 27, 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Change in price (%) Shares of RAO EES of Russia ( 26.26% ) and OAO Lukoil (25.87% ) and Norilsky Nilel ( 9.84% ) were ranked the leaders in terms of turnover in the RTS 8 in September. Hence total turnover of shares of these three issuers accounted for nearly 61.98%. In addition, shares of Surgutneftegaz, Rostelekom and Sberbank of Russia also ranked among the leaders in terms of turnover in the RTS according to the results of week trading within the month.

The top-five list of leaders in terms of capitalization is as follows 9 according to the data as of September 27, 2005: Lukoil $48.34 bln US dollars, Surgutneftegaz $37.91 bln US dollars, Sberbank of Russia $17.9 bln US dollars, Sibneft $17.16 bln US dollars, NorilskY Nikel $16.42 bln US dollars.

Futures market. Activity of investors at the RTS (FORTS) futures market increased markedly in September as opposed to August. Total turnover of the RTS futures and option market accounted for nearly 104.37 bln rubles ( 211.74 thousand transactions, 7.103 million contracts ) in the period be In a classic stock market.

According to the RTS data.

Ukos Tatneft Sibneft GMK LUKoil Russia Russia NorNikel RAO UES Mosenergo Rostelekom Sberbank of Surgutneftegas tween September 1 and 27, 2005 as opposed to 67.39 bln rubles ( 153.94 thousand transactions and 4.69 million contracts ) in August.

Futures were in the largest demand among market participants: the futures market turnover over the period under review accounted for 95.34 bln rubles ( 197.84 thousand transactions and 6.29 million contracts ). Options were in a far less demand in the market the option turnover amounted to nearly 9.04 bln rubles ( 13.89 thousand transactions and 806.67 thousand contracts ). The maximum trading volume in the futures market accounted for 6.97 bln rubles on September 7, while the minimum one was 3.23 bln rubles on September 26.

Corporate Bond Market.

The situation in the corporate and regional bond was quiet with a weakly singular upward trend in September 2005. The market was corrected slightly downwards in the very beginning of the month, but purchases resumed upon the news of the likely upgrade of the Russias sovereign credit rating. A fairly high level of liquidity in the banking sector gave a certain support to the market.


Dynamics of corporate bond indices 122.ZETBI-Corp ZETBI-Corp120. market kept growing moderately in spite of a large volume of primary placements. The demand considerably overtook the supply at the previously held auctions, which can be considered as an evidence of positive behavior of investors. The demand for bonds was supported at an acceptable level by a favorable situation in the foreign exchange market and the banking sector. The situation was stable in the beginning of the second half of the month due to the fact that investors shifted their interest towards the primary market where a series of large placements were carried out. In spite of the fact that the auctions drew a significant amount of funds from the secondary market, a high level of liquidity in the banking sector neutralized this effect.

The price index of corporate bonds traded in the MICEX10 grew by 0.20 points ( +0.18% ), while the index of the top-10 most liquid corporate bonds grew by 0.52 points ( +0.43% ) in the period between September 1 and 27. The total turnover of the corporate bonds market sector in the MICEX totaled about 9.43 bln rubles with the average daily turnover of 554.47 ml rubles in the period be The calculations were based on the corporate bond indices traded in the MICEX and calculated by Zenit Bank. September 1 and 23 ( about 11.58 bln rubles with the average daily turnover of 579.1 ml rubles in August ). Hence the turnover of the corporate bonds issued by Russian companies slightly decreased in September 2005 as compared to the corresponding figures in August 2005.

External Factors Effecting the Russian Stock Market.

Downward correction of prices started gradually in the first half of the month after a rapid growth of oil quotations at the end of August. This, among other reasons, was caused by a decision made by the US Government and some developed countries to use oil from strategic oil reserves in order to get the world oil market stabilized. In addition, some oil-refinery facilities located in the United States may defer the terms of their routine maintenance to a later date due to Hurricane Katrina, which will also provide a certain stabilization of oil products supply to the internal market. A considerable decline in prices was restricted by the EIAs and APIs data on oil reserves. Reserves of oil, gasoline and other distillates diminished by mid-September. In addition, according to the head of the International Energy Agency, Hurricane Katrina may cause a large-scale energy crisis if it has a dramatic affect on the oil production industry.

The correction, however, did not last long due to a new impending Hurricane Rita which might cause more destruction than the Catherine. The market virtually paid no attention to the statistics on fuel reserves in the United States which was unexpectedly found to be better than the forecasts. An OPECs decision on keeping the official quotas unchanged became another factor that supported oil quotations. Not only did all these factors allowed oil quotations to remain above the level of $60 US dollars per barrel but also go ahead to higher levels.

The situation in the world stock markets remained favorable enough in September 2005 ( see Table 1 ). Basic stock exchange indices at the developed countries ( except for the United States ) and less developed countries grew up in total in September 2005.

Quotations grew gradually in the US stock market in the first half of the month. This in part can be explained by correction of prices in the world oil market and the news on that Hurricane Katrina was unlikely to be catastrophic for the US economy and slow down the economic growth grates. The basic US stock exchange indicators declined since the beginning of the second half of the month, which was caused by negative macroeconomic data: the number of orders for durable goods reduced and housing sales in the secondary market dropped.

Fig. 6.

190% Dow Jones Industrial Average 180% NASDAQ Composite The RTS Index 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% should be noted in analyzing the effect of external factors on the Russian stock market that in September 2005, the market movement depended largely on the situation in the world oil market, while it was only selectively effected by the situation in the US stock market. The Russian market was more effected by oil quotations in the period of negative trends in the US market and oil price growth.

At the same time, investors stopped buying and partly fixed their profits when US indices grew and oil prices dropped. Hence correlation between indices of the developed countries and the Russian Federation kept decreasing within the last several months, while, on the contrary, a fairly high correlation was observed in stock and black gold prices.

Corporate News.

OAO Lukoil The company published its consolidated financial statement 20 for the first half of 2005 on September which was prepared in accordance with the universally accepted US accounting standards ( US GAAP ). The net profit of the company totaled $2 590 ml US dollars, which is by 52.7% more than in the corresponding period of the previous year, according to the data presented for the first half of 2005. The EBITDA ( Earnings before Interest, Taxation, Depreciation & Amortization ) reached $4 298 ml US dollars or grew by 45%. Sales revenues grew up to total $24 049 ml US dollars or by 66.1%. In addition, total tax expenses exceeded $7 bln US dollars, which is almost doubled the corresponding parameter in the previous year. Cost per unit of oil production increased by 6.3% as compared to the first half of 2004 and totaled $2,69 US dollars per barrel.

Table 1.

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