Last week’s main events:

January 29—The government made public that it may change the previously announced structure of RAO EES Rossiya stock auctions. The company’s stock lost 5.8%.
January 30—YUKOS released its results for the third quarter of 2003 according to US GAAP standards. Overall they conformed with analysts’ predictions. The company’s stock gained 1.6%.
—The RAO EES Board of Directors approved reform of Mosenergo.
February 3—YUKOS and Sibneft primary shareholders signed a protocol to divide the two companies.
—Gazprom placed bonds on the MICEX. The issue was placed in full with an oversubscription of one and a half times and an actual yield at maturity of 8%.
—The State Statistics Committee announced a total increase in the GDP for 2003 of 7.3%.
February 4—The Prosecutor General opened a criminal investigation of telecommunications company Vympelkom. The company’s ADR fell by 6.1% in a day.
—The Ministry of Finance conducted an additional OFZ placement. Only 34% of the announced issue of 24 billion rubles was sold.
February 5—The Meschansky Court in Moscow declared Vasili Shakhnovsky, the former head of YUKOS-Moscow, guilty of tax evasion. Shakhnovsky was then freed, as he had already served his sentence prior to trial.
February 6—Terrorist attack in the Moscow metro
The dollar rate last week remained practically unchanged. Right up until Tuesday, the dollar was swiftly recovering and climbed to 28.6 rubles to the dollar. This was due to the dollar’s stronger performance on world currency exchanges and news that Standard & Poor’s has no intention of raising Russia’s rating to an investment level after the presidential elections. Thanks to the rising exchange rate, dollar sales increased and by Wednesday the dollar had slid back to 28.52 rubles. At present analysts are waiting for the G8 meeting set for February 6-7. However, the dollar will continue to weaken, and March futures are trading on the MICEX at 28.45.
Sales dominated the state ruble securities market in the first half of the week. Market players were getting ready for upcoming major placements. The small rise in the dollar exchange rate held back the bull mood. However, after the auction, where the Ministry of Finance offered a significant premium on secondary-market securities, things looked up. As a result, yields on GKO-OFZ bonds maturing in 2004-2005 fell by an average of 20 base points. The exceptions to this general upward trend were the issues placed this past week. Weighted average prices were used to determine the auction’s results. The Ministry of Finance, it seems, intends to neutralize the pressure of excessive liquidity on the market in the future as well. Thus, analysts are not anticipating any significant changes in yields in the near future.
On the eve of a record-breaking placement of Gazprom bonds, investors on the corporate bond market were selling actively, and the yield on the blue chips rose by 30-40 base points. The yield on AFK Sistema bonds rose by 54 base points and Gazprom bonds by 37. However, the auction results disappointed the market and yield (8%) proved higher than expected. Sales began once again on the secondary market, but by the end of the day the situation had stabilized and by the next trading session, bonds began to recover from their previous decline.
Quotes on the Eurobond market did not change significantly this week. The Euro-30 traded well at 97-98% of face value. Instability on the US Treasuries market, however, did increase market volatility, as macroeconomic news from the US continues to dictate the market. Sales dominated in the corporate segment, and Eurobond yields increased by an average of 10 base points. Only TNK was the exception to the general upward trend, as yield on its bonds fell by 3 base points.
After the government announced it may change how RAO EES will be reformed, the energy giant’s stock plummeted, taking the rest of the stock market along with it. In a single day, the RTS Index lost 1.5%. However, last Monday brought good news and the market recovered. The RTS gained 1% for the week, returning to its high for the year. In the lead was YUKOS, growing by 12.1%. Mosenergo shares also caught investors’ eye. After plans to reform the company were approved, its stock grew by 2.7%. Norilsk Nickel fared worse this week: after it announced that results might be lower than anticipated, its stock lost 1.9%. Lower oil prices also dragged oil stocks down, and Surgutneftegaz, Sibneft, and Tatneft lost between 2.4 and 3.9%.

The Financier’s Date Book

February 10 OPEC meets
February 11 Southern Telecom places 1.5 billion rubles in bonds
February 12 Kristall Finance places 0.5 billion rubles in bonds
The Russian government discusses tax reform
YUKOS Board of Directors meets
Rosbank places 3 billion rubles in bonds