November 12 - The government approved plans to merge Gazprom and Rosneft.

November 15 - Surgutneftegaz released its non-consolidated results for the first three quarters of 2004 according to Russian accounting standards. The company saw a 36.5% increase in earnings.
                       - OMZ paid off $30 million in credit notes.
                       - The head of the bailiff’s service announced that Yuganskneftegaz may be sold as early as December and that the amount received from the sale may not be enough to cover Yukos’s back taxes. Yukos shares lost 5%.

November 16 - The developer Open Investments, part of the Interros Group, conducted an IPO.
                       - Gazprom reported non-consolidated results for the first nine months of this year according to Russian standards and showed a decline in profitability.
                       - ConocoPhilips increased its stake in LUKoil to 10%.

November 17 - Gazprom representatives announced that the company still plans to acquire energy industry assets.
                       - Yukos was officially presented with its 2002 tax bill, totaling $6.8 billion.

November 18 - International rating agency Fitch raised Russia’s sovereign rating to investment grade. The RTS Index rose by 1.3%.

Over the week, the dollar tried to keep up with the ruble and much of the time it fluctuated around the 28.65-28.68 rubles to the dollar mark. The Central Bank rarely got involved in trading and bought dollars at 28.6450 rubles to the dollar. However, on Thursday November 18, the bank dropped its position and let the ruble climb another 13 kopecks, a record gain since April. The weaker dollar on international forex markets played a significant role in this rise. In addition to purely market factors, dollar sales were further encouraged by Fitch’s upgrade of Russia’s rating.

A significant portion of the week on the state ruble bond market passed with light trading and a weak upward trend. On Wednesday November 17, the government conducted two additional OFZ placements totaling 21 billion rubles. The fiscal authorities managed to sell most of the planned issue, around 15.7 billion rubles. The situation on the secondary market changed dramatically when Russia’s rating was upgraded to investment grade. After this good news came on Thursday, prices more or less rose (the Bank of Russia’s refusal to prop up the dollar also played a part). All in all, Fitch’s move will likely have an effect on the market for another two or three weeks, which means the future looks bright for Russian bonds.

On the corporate and municipal bond market, the week saw a plethora of initial placements. Yaroslavl Province placed 1 billion in bonds. Salavatnefteorgsintex also had a successful placement and sold 3 billion rubles in bonds at 10.2% p.a. However, a real initial placement boom is coming toward the end of the month. Placements totaling around 10 billion rubles are planned for late November.

The big news this week broke the pattern of minor fluctuations on the Russian eurobond market. On Thursday, Russia-30s were quoted at 103.5% of face value, a record high, though they couldn’t hold on to their gains for long. By the end of the day, they had fallen to 102.9% of face. Investor optimism also powered a rise in prices for US T-notes. Notably, short-term issues did not see such dramatic growth, as quotes only rose by 0.4% on the average.

After four days of standstill, the RTS Index took a bold leap upwards, gaining 3.2% for the week. The investment rating news overpowered the negative influence of rumors that tax authorities would soon be coming after other oil companies (in particular Sibneft for 21 billion rubles). On Thursday November 18th, turnover at the RTS quadrupled compared to last week’s average. The leader this week was Mosenergo, once again the focus of strategic purchases, which rose by 20.2%. Gazprom and Sberbank also performed well, gaining 3.4% and 5.6% respectively.

The Financier’s Date Book

November 23    LUKoil places 6 billion rubles in bonds, while Baltika and the Republic of Komi place 1 billion each.

November 24    Krasnoyarsk Territory and UTair place 1 billion in bonds.

November 25    Mechel places 2 billion rubles in bonds, and Svobodny Sokol 600 million rubles.

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