The beginning of last week saw the dollar growing stronger. However, the Central Bank halted the dollar’s upward climb at 30.7 rubles. Ruble liquidity remained low. The IBC rate ranged from 8-15% and correspondent accounts did not exceed 95 billion rubles. This prevented further strengthening of the American currency. The ruble was also helped out by Oleg Vyugin, Deputy Chair of the Central Bank, who hinted that aggressive dollar buying could lead to a serious ruble deficit at the end of the month. It seems likely that the lack of rubles and the Central Bank’s position will not let the dollar grow significantly in the near future. Further on, however, the dollar could get stronger due to lower oil prices.

Two placements happened on the federal ruble bond market, a supplementary OFZ-AD and an initial OFZ-FD bond auction. The Ministry of Finance did not give a premium to the secondary market, which meant that out of the fourteen billion rubles announced, it only managed to place 3.75 billion. The secondary market saw a fall in quotes, though after the auctions investors began to buy bonds with one- or two-year terms. “The end of the month and upcoming tax deadlines will put pressure on the market, and sales will likely increase. At the same time, liquidity is low on the market and we believe that there won’t be any major sell-offs by big investors in September,” states Mikhail Avtukhov, Director of the State and Corporate Bond Operations Division at Guta Bank.

High inter-bank credit interest rates continued to put pressure on the market for sub-federal and corporate bonds last week. This resulted in a rash of sales and little interest in initial placements on the part of investors. The weighed average for yields in the corporate sector increased by 50 base points over the week, meaning losses of 40 base points for investors. Russian blue chips lost 0.6-1% and their yields grew to 11.5-13% p.a. “After this kind of correction, it would be completely logical to expect a market consolidation at prior levels next week,” notes Anastasia Shamina, an analyst at Zenit Bank. “At the same time, buyers could be hampered by the ruble deficit, which is likely to worsen toward the end of the month. The market may not return to its previous levels until early October.”

Russia’s foreign debt securities continued to grow, though not extremely actively. The US markets acted as a catalyst and remained the main item in the news. Worse than expected macroeconomic results made the yield on Russian Eurobonds fall by 2-10 base points. However, the Open Market Committee’s decision to reduce interest rates to their former level allowed for prices to return to their former levels.

The RTS index passed the 555-point mark thanks to rumors about an impending sale of a block of YUKOS stock to a Western oil company. The market couldn’t hold on, however, as the oil company denied the rumor and investors lost their enthusiasm. Their attempt to hold on to profits which began on Wednesday hurt Sibneft and YUKOS most, which lost 2.5% and 0.5% respectively. Sberbank also suffered a loss of 0.9%. Norilsk Nickel ended up on top, gaining 7.3%. According to Yuri Makeyev, an analyst at IT Invest, in the short term, the approaching date of the final closing of the YUKOS shareholder register for mid-term dividends (September 25^th) will temporarily hold the market up. New information about possible sales of blocks of YUKOS-Sibneft stock could also result in the usual jump in Russian stock prices.

The Financier’s Date Book

September 24 Moscow places 4 billions in bonds

September 24 OPEC meeting

September Severstal publishes its results for 2002 according to international accounting standards

September Aeroflot releases its results for the first quarter of 2003 according to the Russian Accounting Standard

Late September OMZ listing on the London exchange