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According to preliminary estimates, in October the Russias monetary base calculated according to the money survey method (including forex denominated deposits) declined by 0.84 per cent from RUR 3572.billion to RUR 3543.05 billion. In January through October, this indicator increased by 24.65 per cent (according to the adjusted data, as on January 1 its amount was at RUR 2842.41 billion). The amount of money outside banks (aggregate 0) was at RUR 975.8 billion as on November 1, having grown by 1.95 per cent over the month. This indicator increased by 27.66 per cent over the ten months of the year (as on January 1, it made RUR 764.4 billion).

In December of 2003, Russia transferred US $ 1414.5 million as its foreign debt repayment. This, in turn, included US $ 693.4 million paid to official creditor countries, banks and companies: US $ 617.5 million as debt repayment and US $ 76.8 million as interest payments. The payments to international financial institutions made US $ 190.8 million: 182.3 million as debt repayment and US $ 8.5 million as interest payments respectively. Besides, in December, US $ 529.4 million were transferred as the payment of interest on RF Eurobonds.

As on January 1, 2003, the amount of the public foreign debt of RF was at US $ 122 billion, or 35 per cent of GDP; it is expected that by the end of the year it shall diminish to US $ 119 billion, or 27.5 per cent of GDP.

In December, the RF CBR announced that it intends to reduce the rate of mandatory allocations into the Fund of Mandatory Reserves (FMR) for banks in the 1st quarter of 2004.

P. Trounin Financial Markets The Market for Government Securities In the period from November 24 till December 19, an apparent decline in the yields of traded instruments was observed on the market of Russian forex denominated public debt. On the whole, in the late November and early December the market dynamics were determined by investors expectations for the results of the Parliamentary elections. Nevertheless, after the elections this uncertainty factor was eliminated, what facilitated a decline in the yields of sovereign forex denominated bonds. Thus, on December 19 the yield to maturity of Russian Eurobonds RUS-30 was 7.27 per cent p.a. (end of November: 7.57 per cent); RUS-18:

6.95 per cent p.a. (end of November: 7.19 per cent). Besides, on the same date the yield to maturity of the Russian Eurobonds was: Minfin bonds, 7th tranche: 6.47 per cent; Minfin bonds, 6th tranche: 4.05 per cent;

Minfin bonds, 5th tranche: 5.62 per cent; RUS-07: 4.42 per cent. Therefore, over December the levels of yields of all sovereign Eurobonds have significantly decreased.

Over the month, the market of Ruble denominated public debt has been affected by a rather high level of liquidity in the banking sector. Among other most important factors of the growth observed on the market, there may be noted the results of the elections indicating the stability of the political course, stable indicators of economic growth in Russia, as well as the depreciating US dollar. Over the period from December 1 to 19, the aggregate turnover of the market made about RUR 10.7 billion, what was significantly above the respective indicator registered in the first three weeks of November (RUR 6.5 billion) while the average daily turnover was at RUR 766 million (RUR 467 million in November).

In the same period, there took place a regular auction for the placement of OFZ - AD. The par value amount of OFZ AD 46001 placement made RUR 3 billion. At the auction the demand was registered at RUR 1.9 billion, while the actual amount of placement made RUR 1.8 billion. The cutoff price was set at the level of 108.65 per cent of the face value (income of 8.24 per cent per annum), while the weighed average yield registered after the completion of the auction was at 8.17 per cent.

As on December 23, the amount of the GKO OFZ market made RUR 293.22 billion at par and RUR 314.6 billion at the market value. The duration of the GKO-OFZ market portfolio was 902.85 days.


Minfin bonds' yields to maturity in September 2003 through December 8.0% Tranche 5 Tranche 6 Tranche 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% FIGURE 2.

Yields to maturity of the Russian eurobonds with maturity in 2030, 2018 and 2007 in September 2003 through December 8.5% 7.5% 6.5% 5.5% 4.5% 3.5% 2.5% USD-2030 USD-2007 USD- Market for Corporate Securities Situation on the stock market.

A sharp downfall in quotations observed on the Russian stock market in November was somewhat reversed in December. After the Duma elections the situation on the whole was characterized by declining risks of political uncertainty: in general, foreign investors demonstrated their confidence in the Russian market. The major factors behind the growth observed on the market were the victory of the Presidential party, favorable national macroeconomic indicators, and the high level of oil prices. In spite of a number of negative corporate news (cancellation of the YUKOS and Sibneft merger, extention of the time of holding in custody of M. Khodorkovsky) in the period from November 28 till December 23 the RTS index increased by 38.95 points, what corresponds to a growth by 7.36 per cent.


90 650.The total volume of trading ($) 80 600.The RTS Index 70 550.60 500.50 450.40 400.30 350.20 300.10 250.200.In the period from December 1 to 23, the turnover in the RTS trading amounted to US $ 356.99 million, what was significantly above the respective indicator observed in the preceding month (in the first three weeks of November, the turnover in the RTS trading was about US $ 286 million). The average daily turnover at the RTS has somewhat increased in comparison with the respective indicator registered in this November and made US $ 22.3 million (US $ 20.4 million in October). The highest volume of trade at the RTS (US $ 42.1 million) was observed on December 2; the lowest trade volume (US $ 13.5 million) was observed on December 22. Therefore, the dynamics of the Russian stock market and indicators of activity demonstrate that the market experiences a recovery of investors confidence after the significant decline observed in November.

It is worth a special mentioning that according to the results of the month there was observed an increase in the market value across all blue chips with the exception of YUKOS (in the period from November 24 till December 23). Thus, the leaders of the growth in prices were shares in Sibneft whose quotations rose by 28.96 per cent over the period under observation. These stocks were followed by shares in Norilsk Nickel (20.98 per cent), Surgutneftegaz (18.8 per cent), Tatneft (17.03 per cent), and RAO UES of Russia (16.per cent). The only outsider on the market was YUKOS, whose shares declined even more by the end of the month. At the background of the information that the merger with Sibneft was cancelled, the value of YUKOS stocks declined by 7.77 per cent.

points mln US dollars s 4.

Dynamics of the Russian Blue Chips from November 24 to December 23, 30% 25% 20% 15% 10% 5% 0% -5% -10% Change in price (%) From December 1 till December 19, the RAO UES of Russia shares took the top position by the volume of turnover in the RTS12: the total transactions amounted to 26.45 per cent. The amount of transactions with the shares in YUKOS was somewhat below that demonstrated by the RAO UES of Russia (19.07 per cent). The shares of LUKoil followed: the volume of transactions with this company's shares made 15.95 percent of the total turnover. In spite of the fact that Rostelekom accounted for significantly smaller share of the RTS turnover did not prevent the company to be the fourth in terms of turnover of its stocks. Thus, the percentage of transactions with the shares of only these four companies was 67.25 per cent of the total traded turnover on the classical RTS stock market during the period under observation and remained at the same level as was registered in November of 2003.

As on November 23, the top five leaders of the national stock market by capitalization look as follows13:

YUKOS: US $ 29.06 billion, Surgutneftegaz: US $ 21.096 billion; LUKoil: US $ 19.46 billion; MMC Norilsk Nickel: US $ 14.01 billion; Sibneft: US $ 13.5 billion.

The market for term contracts. In December, the RTS market for term contracts (FORTS) demonstrated a decrease in the trading activity of participants in comparison with the figures registered in November. Thus, in the period from December 1 till December 23 the volume of trade in futures and options at the RTS amounted to about RUR 15.9 billion (79.9 thousand transactions; 2.1 million contracts), what was somewhat below the respective indicators registered in the preceding month (RUR 17.6 billion, 82.2 thousand transactions; 2.57 million contracts).

As usual, futures contracts account for the greatest percentage of transactions: the volume of trade in these contracts reached RUR 14.74 billion (1.94 million contracts, 77.29 thousand transactions) in the period from December 1 till December 23. As before, options were in a much lower demand: the respective amount of trading made about RUR 1.189 million. The maximum trading volume was observed on December 5 and made RUR 1.726 billion (as compared with RUR 1.64 registered in November), while the minimum trading volume (RUR 395.66 million as compared with RUR 701.6 million in November) was registered on December 22.

On the classical stock market.

According to the RTS.

Ukos Tatneft Sibneft GMK LUKoil Russia Russia NorNikel RAO UES Mosenergo Rostelekom Sberbank of Surgutneftegas Corporate bond market. The situation on the market of corporate bonds closely followed the development observed in other segments of the Russian financial market. In the late November, on the market there was observed a significant growth in quotations of corporate bonds issued by Russian issuers, which stopped as the market experienced a one day adjustment after the information about the cancellation of the Sibneft YUKOS merger had become public. However, already on the following day the quotations recovered. The dynamics of quotations demonstrate the growing influence of macroeconomic factors. The respective factors include the Ruble appreciation, a decline in the estimated inflation rates to the targets set forth by the budget indicators (12 per cent) for 2003, and sufficient level of the Ruble liquidity. Besides, the insufficient amount of the primary market facilitates a growth in prices of Russian corporate bonds.

In the period from November 28 till December 19 the total turnover in the bond sector of MICEX was RUR 6.9 billion, what was by about RUR 4.8 billion below the respective figures registered this November (RUR 11.7 billion). In December, the average daily turnover made RUR 495.1 million, what was somewhat below the respective indicator registered in November (RUR 616.1 million). In the period from November 28 till December 19, the price index of corporate bonds traded at the MICEX14 increased by 1.81 points (1.per cent) and the index of ten most liquid corporate sector bonds decreased by 3.11 points (2.78 per cent).

FIGURE Dynamics of corporate bond indices 115.0% ZETBI-Corp ZETBI-Corp112.5% 110.0% 107.5% 105.0% 102.5% 100.0% 97.5% 95.0% External factors affecting the dynamics of the Russian stock market. In the period from December till December 23, an upward trend in prices was observed on the world oil market. At the OPEC summit held in the beginning of the month, it was decided to leave the extraction quotas unchanged, what the representatives of the cartel motivated by the observed balance of demand and supply. On the whole, the market expected exactly such a decision, therefore it did not affect the price level. In the middle of the month, a certain decline in prices was observed after the information that the US troops had captured S.

Hussein was made public. By December 18, the US fuel reserves dropped to the minimal level (according to the US Energy Information Administration (EIA)) at which oil processing plants could steadily operate.

According to the data published by EIA and the American Petroleum Institute (API), the US fuel reserves declined across practically all positions, what facilitated a further growth in quotations. However, the The indices of corporate bonds traded at the MICEX that have been used for the calculations are calculated by Zenit Bank. of the term of the January WTI futures was accompanied by the close out of this contract, what resulted in a technical drop in quotations observed on the market. In the beginning of the last week of the month, the market demonstrated a significant decline in prices, what may be explained by the statement made by the Indonesian Minister of Oil Industry, who should become the Chairman of OPEC on January 1, 2004. His statement that the current level of prices was too high and that it was necessary to increase quotas contradicted to the forecasts that quotas might be further reduced at the February summit of OPEC member countries. The market reacted to these statements by a drop in quotations: in one day, (from December 22 to 23) the Brent price fell by US $ 2.25 and at the close of the exchange was at US $ 28.77 per barrel. Due to this fact, in the period from November 28 till December 23 the world Brent prices declined by US $ 0.12 per barrel (- 0.42 per cent).


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