Date Major developments October 1 - entry into force of the Russian Central bank mandatory requirement to the major banks to disclose information on large investments in securities and the largest credits October 3 - decision of the Federal Financial Market Service on suspension of MICEX and RTS trades three times within one day - USA Congress has approved the plan to allocate USD 700 bln to support financial sector October 4–5 - the Government of Germany and a consortium of private banks approved the plan to save the largest German mortgage bank Hypo Real Estate Holdings AG - decision on acquisition financial holding Fortis, the largest in Belgium, by the French bank BNP Paribas - the largest in Italy bank UniCredit notified on the plans to involve additional funds - decision to guarantee all bank deposits in Germany - South Korea allocated USD 240 billion from national reserve to support the banking sector - USA has suspended merging of the US bank Wachovia with Wells Fargo October 6 - suspension of bidding at MICEX stock exchange three times during the day due to the collapse of technical MICEX index over 5 per cent by the beginning of trades;
suspension of RTS trades twice during the day - Federal Antimonopoly Service has approved acquisition AKB “Sbyaz-Bank by Vnesheconombank - oil prices downfall as of the day results to less than 90 dollars per barrel; USD growth and EURO decline October 7 - suspension of bidding on the stock exchanges MICEX and RTS by the order by the Federal Service for Financial Markets for 3 and 2.5 hours, respectively - US FRS has approved the acquisition of 24.9 per cent of Morgan Stanley by Japan bank Mitsubishi UFG Financial Group - nationalization of the second largest bank in Iceland, Landsbanki and allocation of credit in the amount of EURO 500 million to the Iceland largest bank to maintain the necessary level of funding. Moody's rating agency has downgraded Iceland credit rating to «negative».
October 8 - suspension of bidding on the MICEX stock exchange before October 10, or until further notice from Federal Financial Markets Service, and in RTS - until further notice due to the reduction of technical indexes lower the preset value, «blue chips» downgrading over 10 per cent by COB of the day before - interest rates downgrading by the USA central banks (to 1,5 per cent), the European Central Bank (to 3.75 per cent), Britain (to 4.5 per cent), Canada (to 2.5 per cent), Sweden (to 4.25 per cent), Switzerland (2 5 per cent) and China (up to 6.93 per cent) - OPEC oil basket price has fallen down to 80 dollars per barrel for the first time within the year.
October 9 - The RF Central bank has informed on reducing the volume of international reserves of Russia by 16.7 billion from September 26 to October - U.S. FRS has informed of national financing the public insurance company AIG with the new credit, amounting to USD 37.8 billion on bail of securities - reducing interest rates by central banks of South Korea (to 5 per cent), Hong Kong (to 2 per cent) and Taiwan (up to 3.25 per cent) - information is disclosed on nationalization of the largest Icelandic bank Kaupthing to maintain the banking system - the Bank of America Corp. decision to repurchase previously sold preferred shares for the total amount of USD 4.7 billion - revocation of banking license from JSC IBC «Eurasia Center», based on the failure to perform its liabilities October 10 - suspension of securities bidding in MICEX and RTS, with the exception of repurchasing and targeted transactions - Moody's rating agency statement on a possible decline in credit rating of Morgan Stanley bank - bankruptcy of the Japanese insurance company Yamato Life Insurance Co.
- continued strengthening of the U.S. dollar in the international currency market - British government has adopted a plan for financial support of the banking sector October 12 - decision of the Governments of the European Union to allocate more than EURO 1.5 trillion for interbanking loans guarantees - completion of the acquisition of 21 per cent share in Morgan Stanley by Japanese bank Mitsubishi UFG Financial Group for USD 9 billion October 13 - suspension of bidding at the stock exchanges MICEX and RTS due to the first upgrading and further decline of the technical indices beyond the preset value - the German Government has approved a plan for the financial support of banks in the amount USD 480 billion; the Government of France decided to provide EURO 320 bln for interbanking guarantees October 14 - legislation has entered into force, aimed at stabilization of the Russian financial market: on allocation USD 50 billion to the to repay their foreign debts (via Vnesheconombank) and unsecured credits provision by the RF Central Bank to the banks, which ratings have not downgraded beyond the preset level - amendments to the Tax Code on VAT payable by monthly installments (within three months after the relevant tax period) are entered into force - plans are disclosed to acquire 75.65 per cent share in the US company Sovereign Bancorp by Spanish bank Banco Santander for USD 1.9 billion October 15 - suspension of bidding at MICEX and RTS due to the decline of technical indices beyond the preset level; downgrading of «blue chips» majority by 10 per cent on average by COB of the day before - Acquisition Sobinbanka by Gazenergoprombankom for a symbolic cost - RF Central Bank has declined the threshold of mandatory reserves October 16 - RF CB has informed on reducing the volume of the Russian international reserves by USD 15.5 billion from October 3 to October 17 - the acquisition of Bank «Globex» by Vnesheconombank for the symbolic amount as a result of liquidity problems October 22 - information on the losses of American bank Wachovia Corp., amounting to USD 23.89 billion in the 3rd quarter of - information on the losses of one of the largest Swiss bank Credit Suisse in the amount of EURO 1.46 billion within the first nine months of - decline in oil prices to below 70 dollars per barrel.; USD strengthening in the international currency market - the acquisition of OAO «AKB «Russian capital» by OAO «National Reserve Bank» for the symbolic amount as a result of liquidity problems - revocation of banking license from the bank «Russian banking house», due to, among other things, the failure to perform its liabilities October 23 - RF CB publication of information on reducing the volume of international reserves of Russia by USD 14.9 billion from 10 to 17 October - Standard & Poor's agency has downgraded the rating of Russia from «stable» to «negative» October 24 - suspension of bidding at MICEX and RTS until Oct. 28 or until further notice from the Federal Service for Financial Markets due to reduction of technical indexes beyond the preset value, «blue chips» downfall over 10 per cent by COB of the day before - reduction of OPEC oil production quotas to 1.5 million barrels per day from November 1, - decline in oil prices to 62 dollars per barrel.
Government securities market In October, Russian Eurobonds demonstrated in general a growing dynamics in profitability due to declined demand in the government securities market at the background of the Russian securities market downfall, on the one hand, and aggravated liquidity crisis (despite all measures, taken by the government to mitigate liquidity problems), on the other hand.
As of October 26, 2008, the Russian Eurobonds’ RUS-10 yield to maturity has significantly increased as compared with the level of September 28, 2008 from 1.9 to 5.32 per cent per annum (2.times), RUS-30 – from 6.97 per cent to 12.50 per cent per annum (by 79.34 per cent), RUS-28 – from 7.01 to 10.50 per cent per annum (by 49.79 per cent) and. RUS-18 – from 6.00 to 7.06 per cent per annum (by 17.67 per cent). As of the same date, the upgrading trend was also observed in the yields of external currency debt bonds. Thus, the yield to redemption of the seventh tranche of external currency debt bonds has grown from 4.11 to 4.29 per cent per annum (by 4.38 per cent) against September 28, 2008 (see Figs 1-2).
4,65% Tranche 4,55% 4,45% 4,35% 4,25% 4,15% 4,05% 3,95% Fig. 1.External currency debt bonds yield to maturity in August-October 01.08.06.08.11.08.14.08.19.08.22.08.27.08.01.09.04.09.09.09.12.09.17.09.22.09.25.09.30.09.03.10.08.10.15.10.184.108.40.206.13,50% RUS-2030 RUS-2010 RUS-2018 RUS-12,00% 10,50% 9,00% 7,50% 6,00% 4,50% 3,00% 1,50% Fig. 2.Yields to maturity of the Russian eurobonds with maturity in 2010, 2018, 2028 and 2030 in August - October Within the period from September 29 to October 26 the total turnover of GKO- OFZ secondary market amounted to approximately RUR 44.40 billion with an average daily turnover of RUR 2.billion. (about RUR 58.61 billion with an average daily turnover of RUR 2.34 billion in September), what demonstrated a decline of average daily turnover in October as compared with preceding month by 5.13 per cent.
Like in preceding month, only one auction on additional OFZ placements was arranged in the period from September 29 to October 26. Thus, an auction on additional placement of OFZ series was held on October 1 for the amount of RUR 9.57 billion, actual placement made RUR 0.25 billion with an average weighted yield of 6.85 per cent per annum.
Therefore, the turnover in the primary OFZ market in October (RUR 9.57 billion) has increased over 90 per cent as compared with September (RUR 5.00 billion), while the total actual amount of placement within the month (RUR 0.25 billion) has declined more than 15 times as compared with September (RUR 3.79 billion).
As of October 26, the GKO-OFZ market amounted to RUR 1144.02 bln at face value and to RUR 1048.38 bln at market value. The duration of the GKO-OFZ market portfolio was 2014.82 days, having significantly decreased (by 38.68 days) as compared with preceding month (as of September 31, 2008).
Stock market Stock market situation The collapse in global financial and commodity markets, strengthened negative expectations of investors for the deepening financial crisis and the panic in the Russian stock market contributed to the downfall in the Russian stock market in October. The frequent use of the Federal Service for Financial Markets such unprecedented measures as suspension of bidding at the Russian stock exchanges MICEX and RTS during the month, the emergence of the first victims of the financial crisis of credit institutions in Russia due to inability to pay their liabilities on time, have also urged the deterioration of the situation in the stock market. Moreover, the situation in the stock market was aggravated after September 23, when the Standard & Poor's Agency has downgraded the Russian sovereign rating from “stable” to “negative” due to the support, provided to financial market from the federal budget and decreased level of reserves at the background of aggravated liquidity crisis and decline in confidence in financial system. All those factors have provoked the downgrading of the most liquid securi 01.08.06.08.11.08.14.08.19.08.22.08.27.08.01.09.04.09.09.09.12.09.17.09.22.09.25.09.30.09.03.10.08.10.13.10.220.127.116.11.24.10.01.10.06.10.09.10.18.104.22.168.22.10.ties value in the Russian stock markets in October (up to 40 per cent), as well as the market stock indices decline in MICEX and RTS over 50 per cent as compared with preceding month.
Throughout October a strong negative dynamics was observed in the Russian stock market. Thus, throughout the month, a general trend to decline in MICEX index was observed. The minimum value for the month the MICEX index reached on October 24: 513.62 points (which is by nearly 40 per cent lower than the relevant indicator for the previous period). The maximum value for the month the MICEX index reached on October 1: 1017.17 points (which is by 25.70 per cent per cent lower than the relevant indicator for the previous period. Such MICEX index downgrading in October has reflected a general decline trend in the quotations of the Russian companies' equities (Fig. 3).
140 2 000,The total volume of trading 130 1 900,(roubles, billion) MICEX Index 120 1 800,110 1 700,100 1 600,90 1 500,80 1 400,70 1 300,60 1 200,50 1 100,40 1 000,30 900,20 800,10 700,0 600,Fig. 3. Dynamics of MICEX Index and trading volume In general, within the period from September 29 to October 26, 2008, the MICEX index has fell down nearly by 50 per cent in absolute terms and made about 506.02 points (within the year, from October 27, 2007 to October 26, 2008 the MICEX index has downgraded by 3.61 times). Over the same period the turnover of trades in shares, included in the MICEX index, made about RUR 424.bln at an average daily turnover of RUR 21.21 bln. (against RUR 757.38 billion with an average daily turnover of RUR 37.87 billion in the preceding period from September 1 through 28). Therefore, the investors’ daily activity in the stock market in October has declined as compared with the preceding month by more than 45 per cent. The indicators of maximum and minimum daily turnover in the market trades in October made, accordingly, RUR 28.47 bln. (as of October 14), and RUR 3.32 bln. (as of October 8).
As of monthly results (from September 29 through October 26), the majority of “blue chips” have shown an expressed downfall. Thus, the utmost downgrading rates were demonstrated by “Tatneft” and “Gasprom Neft”, the value of which has declined by 71.49 per cent and 65.83 per cent, accordingly. Significant downfall was observed also about shares of Sberbank of Russia (by 56.47 per cent), UGMK “Nornickel” (by 55.17 per cent) “Gasprom” (by 55.13 per cent), “Rosneft”(by 52.41 per cent), LUKOIL (by 50.95 per cent), “Mosenergo” (by 50.82 per cent) and VTB Bank (by 39.60 per cent). Far lower decline rates were observed about the shares of “Rostelecom” (by 3.02 per cent) and “Surgutneftegas” (by 2.99 per cent) (See Fig. 4).