August 20         - The Ministry of Finance drafted a new Law on the Federal Budget
                         - ING Bank and Societe Generale left the banking syndicate financing TNK-BP due to Russia’s sovereign risk.
August 23         - YUKOS announced that it will cut operational and capital spending planned for this year by $700 million.
                         - The Supreme Arbitration Court overturned the lower court’s ruling that the privatization of the Sayano-Shushensky Hydroelectric Station was illegal.
                         - Tatneft postponed the release of its annual report for 2003 according to US GAAP. The company’s shares lost 1.5%.
August 24        - MTS announced that it had acquired the remaining 50% of shares in two regional telecom companies, Astrakhan Mobile and Volgograd Mobile, from Yugtelekom.
                         - OMZ formed a new board of directors.
August 25         - A group of YUKOS minority shareholders met with the directors of the Federal Service for Financial Markets.
                          - According to news agencies, Vympelkom bought the second largest cellular provider in Kazakhstan.

Nothing unexpected happened on the currency market last week. The dollar sank by a kopeck to 29.22 rubles to the dollar. The ruble was buoyed by a lack of ruble liquidity (the one-day IBC rate rose to 4-5% and correspondent accounts sank to 170 billion rubles). However, market players are resisting the urge to speculate against the dollar thanks to the quiet presence of the Central Bank. Most market participants believe the dollar exchange rate will range from 29.29-29.31 rubles to the dollar in September.
Due to the slight rise in the IBC rate, most investors on the GKO-OFZ market preferred to take a “wait-and-see” approach, which led to reduced liquidity on the secondary market. Quotes moved in various directions. Last week, the Finance Ministry held an additional placement of two OFZ issues with a small premium for the secondary market. At auction, the Ministry managed to place a little more than half the announced total of 2 billion rubles.
The market for corporate and sub-federal domestic bonds continued its flat trend with little volatility. Trading in corporate bonds was extremely light. The liquidity of second- and third-tier bonds remains limited. Among the more highly traded bonds were Gazprom-3, Tatneft-3, TsNK-3, and Sevstal-1. In the near future, changes in corporate bond yields will generally depend on the IBC rate, which in turn will be defined by the “end of the month” phenomenon and the dollar exchange rate versus the ruble. There is little hope that this market will perk up before the beginning of September.
The week began on the foreign debt market with rising quotes, thanks to good news on the Gazprom front. Even the recent plane crashes and their alarming implications did not stop the upward trend. After macroeconomic data was released in the US and T-notes began to rise, prices for Russian securities followed suit. As a result the yield on Rossiya-30 bonds fell from 7.56% to 7.37%, while the Russian segment’s spread fell by 25 points.
This week, the stock market saw strong growth in prices. After plummeting during the previous week due to bad news from Gazprom, the RTS Index gained 2%. Energy companies led the way up. Mosenergo shares grew by 16.1% after the company made some strategic acquisitions, while RAO UES stock grew by 8.2%. Gazprom and Rostelekom also performed well, gaining 6.2% each. Sibneft and Sberbank fared worst among the blue chips, losing only 1.3%.

The Financier’s Date Book

August 31        MTS announces financial results for the second quarter of 2004 according to US GAAP
                         YUKOS regular shareholders’ meeting
September 2     The city of Moscow places 5 billion in bonds
September 7     Irkutsk Province places 750 million rubles in bonds