Between October 3 and October 27, the price index of corporate bonds traded at the MICEX9 decreased by 0.67 points (by 0.59 per cent), while the index of ten most liquid corporate sector bonds decreased by 1.22 points (by 1.02 per cent). In the period from October 3 till October 27, the total turnover in the bond sector of MICEX made about RUR 12.07 billion and the average daily turnover was at the level of about RUR 635 million (in comparison with RUR 9.43 billion and RUR 554 million registered in September). Therefore, the turnover of the trade with the corporate bonds issued by Russian companies has somewhat increased in comparison with the indicators observed in September.
On the classical stock market.
According to the data presented by the RTS.
The indices of corporate bonds traded at the MICEX that have been used for the calculations are calculated by Zenit Bank.
Figure Dynamics of corporate bond indices 122.ZETBI-Corp ZETBI-Corp188.8.131.52.184.108.40.206.104.External factors affecting the dynamics of the Russian stock market. In October, the overall situation observed on the world oil market was not characterized by clear trends in quotations. In the beginning of the month oil prices dropped below US $ 60 per barrel because of the publication of the data on the fuel reserves of the USA presented by IEA and API. Yet another factor was the decline in demand for gasoline on the part of US consumers. However, later the International Energy Agency published its report forecasting the restoration of the rates of consumption of raw materials in the world. The data on the US fuel reserves demonstrated that these reserves diminished, what, alongside with the drop in the level of oil extraction in the Mexican Bay, was an additional argument for more active purchases of oil on the part of the market operators. At the same time, it should be noted that in October there were observed mixed factors on the market, what did not permit the quotations to demonstrate clear upward or downward dynamics.
In October, the situation on world stock markets remained rather unfavorable (see Table 1). Thus, the major stock indices of the majority of the developed and developing countries of the world significantly declined in October.
Throughout the month, the dynamics of the US stock market were primarily determined by the published macroeconomic statistics, which on the whole was of negative nature. In spite of the fact that the data on the rates of economic growth turned out to be somewhat better than expected, the inflation rates were also above the forecasted figures, what was evidence of higher risks of further growth in the interest rates.
190% Dow Jones Industrial Average 180% NASDAQ Composite The RTS Index 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% In the end, in October the influence of external factors on the Russian stock market enhanced. Due to the lack of significant domestic news, investors have more attentively followed the dynamics of world stock markets and the world oil market.
The OAO LUKoil In October, the OAO LUKoil acting via its 100 per cent subsidiary Finance Limited (Gibraltar), concluded an agreement for a contract amounting to US $ 2 billion for the term of 6 months for purchase of the controlling interest in the Kazakh oil extracting company Nelson Resources Limited. It was an unsecured credit provided at Libor + 0.5 per cent p.a. Citigroup was the single organizer and book runner of this credit. The credit was guaranteed by the OAO LUKoil. In 6 months, LUKoil should refinance this credit via syndicated credits.
Nelson Resources Limited participated in projects aimed at the extraction of hydrocarbons in the western part of the Republic of Kazakhstan at the Alibekmola, Kozhsai, Karakuduk, North Buzachi, and Arman deposits. The Nelson Resources Limited is a cooperator of the majority of these projects.
Besides, the company is a participant of the option agreement on two geological exploration blocs in the Kazakh sector of the Caspian See – South Zhambai and South Zaburuie. The proved and probable hydrocarbon resources owned by the Nelson Resources Limited make 269.6 barrels.
The OAO Sibneft In October, the company published the financial results of its operations carried out in the first six months of this year. In accordance with the financial results calculated in the accordance with US GAAP published on October 4, net profits of Sibneft increased by 44 per cent and made US $ 1.billion as compared with US $ 988 million registered at the respective period of the last year. The growth in the company’s profits was determined by increasing oil prices and oil products observed both on the international and domestic markets in spite of growing costs of electrical power, transportation costs, taxes, and export duties.
The company’s proceeds increased by 43 per cent from US $ 4.01 billion registered in the respective period of 2004 to US $ 5.73 billion. The EBITDA indicator (earnings before interest, depreciation, tax, and amortization) in the first six months of this year made US $ 1.94 billion, what was by 01.09.22.09.13.10.03.11.220.127.116.11.05.01.26.01.16.02.08.03.29.03.19.04.10.05.30.05.20.06.11.07.01.08.22.08.12.09.03.10.24.10.per cent above the respective indicator of the last year (US $ 1.50 billion). As on June 30, 2005, the credit portfolio of the Sibneft group was at US $ 1.50 billion.
On October 21, the company officially announced the finalization of the transaction for the sale of 72.66 per cent of shares in Sibneft controlled by the company Millhouse Capital to Gazprom. At the meeting of the Sibneft Board of Directors there was taken the decision to suspend the powers of Eugene Shvidler as the company’s President. Alexander Ryazanov, the deputy Chairman of the Board of Gazprom, was appointed as the acting President of the company.
The OAO Gazprom In September of 2004, the RF Government proposed to increase the share of the state in the authorized capital of OAO Gazprom at the expense of the transfer to it of the shares in the state owned oil company OAO NK Rosneft. In this connection, at the OAO Gazprom there was created a working group headed by the deputy Chairman of the Board of the OAO Gazprom M. Sereda, and there was approved the action plan aimed at the integration of the OAO NK Rosneft in the structure of the company. In accordance with the plan, in October of this year there were determined consultants in the framework of the transaction concerning the transfer of assets of the OAO NK Rosneft. There were discussed several applications from the companies offering their consulting services with respect to this transaction. The Dresdner Kleinwort Wasserstein should become the financial consultant with respect to the structuring of the transaction and carry out the evaluation of the value of assets owned by Rosneft and the block of shares in the OAO Gazprom held by subsidiaries of the company. In order to carry out these operations, the Dresdner Kleinwort Wasserstein should create three independent groups of experts: for the evaluation of the assets owned by Rosneft, evaluation of shares of Gazprom, and preparation of the structure of the transaction. Deutsche Bank and City Group should independently make reports about the fairness of the transaction as concerns its structure and evaluation of assets.
On October 12, the OAO Gazprom placed its Ruble denominated bonds of A 5 series of nominal value of Rub. 1000 termed 3 years. The rate of the coupon paid every 182 days was set at 7.58 per cent p. a. basing on the results of the auction held at the Moscow Inter-bank Currency Exchange. Investors presented 120 applications amounting to more than RUR 9 billion. In the course of the auction, applications were satisfied. The attracted funds should be used for financing of capital investments necessary to maintain current production capacities, implementation of new prospective projects, and refinancing of short time debts, and optimization of the structure of the debt portfolio.
On October 21, in accordance with the terms of the sales contract of September 28, 2005, which concerned the sale of 72.663 per cent of the shares of the OAO Sibneft, these shares were transferred to affiliated structures of the Millhouse Capital (Gazprom Finance B. V., a 100 per cent subsidiary of the OAO Gazprom). For purchase of the Sibneft shares, Gazprom had attracted the funding amounting to US $ 13.079 billion from a consortium of international banks. The consortium included Dresdner Kleinwort Wasserstein (DrKW), ABN AMRO, Citigroup, Credit Suisse First Boston (CSFB), Goldman Sachs, and Morgan Stanley. Earlier, Gazprom had purchased 3.016 per cent of shares in Sibneft from the AB Gazprombank (ZAO). Therefore, Gazprom obtained control over 75.679 per cent of shares in the OAO Sibneft.
Besides, the OAO Gazprom received the expert Statement prepared by the London branch of the Deutsche Bank with respect to the purchasing price of 72.663 per cent in the OAO Sibneft set at US $ 13.079 billion by the Gazprom Finance B.V., an affiliated structure of Gazprom. As a result of the evaluation, the Deutsche Bank had derived the conclusion that the price at US $ 13.079 billion is a fair price for the OAO Gazprom from the financial standpoint. The price was reduced from the price of US $ 13.091 billion announced previously as the result of additional negotiations between the purchaser and sellers.
The RAO UES of Russia On October 21, 2005, the RAO UES of Russia redeemed interest bearing bonds of the second series amounting to RUR 3 billion, and paid dividends relating to the 6th coupon period amounting to RUR 225.63 million. The amount of the coupon yield per one share of par value of Rub. 1000 made RUR 75.21. The payment agent and underwriter of the issue was the Investment bank Trust. Bonds had coupons with the interest rates of 15 per cent p. a. Previous 5 coupons amounting to RUR 1.12 billion had also been fully paid in timely manner. As on October 22, the RAO UES of Russia made annual offer envisaging the early redemption of bonds at the price set at 102.36 per cent of the par value (RUR 1023.6 per bond); however, no investor had used this right. The decision to issue bonds amounting to RUR 3 billion was taken by the company’s Board of Directors at its meeting held on June 21, 2002, the placement took place at the MICEX on October 22, 2002. The report about the results of the placement of bonds was registered by the FKTsB on November 19, 2002. The term of maturity of bonds was set at 1095 days. The financial reserves attracted as a result of the bond placement were invested by the RAO UES of Russia for financing of its current operations.
Dynamics of international stock market indices Change within the Change since the Data as on October 27, 2005 Value month (in %)10 beginning of the year (in %) 607,57 -7,49% 49,90% RTS (Russia) 10729,43 -2,16% -4,66% Dow Jones Industrial Average (USA) 2152,15 -2,49% -4,10% Nasdaq Composite (USA) 1202,08 -3,02% -1,93% S&P 500 (USA) 4847,00 -4,86% 6,93% FTSE 100 (UK) 4291,53 -3,22% 11,99% DAX-30 (Germany) 3855,68 -4,63% 12,47% CAC-40 (France) 5768,70 0,99% 19,95% Swiss Market (Switzerland) 11517,75 0,80% 16,49% Nikkei-225 (Japan) 25722,00 -5,64% 13,26% Bovespa (Brazil) 13022,82 -2,30% 18,54% IPC (Mexico) 1795,89 -3,40% 15,45% IPSA (Chile) 2070,15 -4,54% 6,36% Straits Times (Singapore) 893,71 -3,58% 30,51% Seoul Composite (South Korea) 25445,15 -6,14% 22,90% ISE National-100 (Turkey) 542,22 -6,16% 12,13% Morgan Stanley Emerging Markets Free Index The Foreign Exchange Market.
In October, on the foreign exchange market there prevailed mixed trends of exchange rates. In the beginning of the month, the appreciation of the US dollar against the Ruble stopped, while the exchange rate of the Euro reflecting the trends observed on the world market appreciated against the Russian currency. A certain stabilization of the political situation in Germany facilitated the appreciation of the Euro in spite of the decision to retain the interest rate made by the ECB. At the same time, at the background of growing inflationary expectations and possible rise of the exchange rate in the USA the exchange rate of the US dollar started to grow again, what resulted in its appreciation against the Ruble. On the contrary, the Euro began to depreciate as a result of the publication of unfavorable German macroeconomic statistics. In the second half of the month, exchange rates stabilized at their respective levels registered at that time and later demonstrated different trends thus reflecting the mixed dynamics observed on the FOREX market. On the one hand, forex denominated export proceeds created prerequisites for appreciation of the Ruble. On the other hand, the US dollar was supported by the publication of positive macroeconomic data with respect to the USA.
In the period between October 1 and October 28, the US $ depreciated by RUR 0.055 (by 0.19 per cent) and made RUR 28.48 per US $. The aggregate volume of trade in the US Dollar at the SELT in the period from October 3 till October 27 made about US $ 29.98 billion, while the average daily turn In relation to the levels registered on September 27, 2005.
over made US $ 2.18 billion (as compared with about US $ 37.16 billion and US $ 2.18 billion registered in September). During the period under review, the highest volume of trade in the US Dollar, about US $ 2.29 billion, was observed on October 27; the lowest volume, US $ 845 million, was observed on October 10.
This October, the Ruble liquidity in the banking sector demonstrated a significant increase in comparison with the figures registered in September of 2005: in October, the average balances of correspondent accounts of credit organizations with the Bank of Russia made about RUR 334.7 billion as compared with RUR 306.85 billion registered in September of 2005.
Dynamics of the Official USD/RUR and EUR/RUR Exchange Rates in 2004-40.39.Official USD/RUR exchange rate 38.Official EUR/RUR exchange rate 18.104.22.168.22.214.171.124.29.28.27.Figure 8.
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