The major stock indicators of both developed and the majority of developing countries were characterized by growth. The only exception was the Russian stock market and a number of emerging markets.
Over the first few days of March, on the world stock markets there was observed a certain deterioration of the business situation. Later, the market fell somewhat after the sharp increase in the yields of US government bonds; however, after that the market entered the stage of a short time growth, which was caused primarily by rather favorable data on the state of the labor market in the USA and, later, by macroeconomic statistics demonstrating a decline in inflation rates. The US stock market was also supported by favorable corporate news, for instance, the excellent financial results demonstrated in the 1st quarter by Goldman Sachs, as well as a certain decrease in the yields of government bonds.
Later, in the beginning of the second half of the month, the mixed dynamics of major indices were observed on the market. While on the one hand the next publication of macroeconomic data confirmed the earlier signals about the decline in the inflationary pressure, the sharp growth in oil prices significantly limited the possibility of the market to grow further, as well as the consolidation occurring at the background of the expectations of the next meeting of the FRS. The last week prior to the regular meeting of the US Open Market Committee ended without significant changes in the US indices, what to a significant degree was determined by the expectations of the next raise of the base interest rate.
01.02.17.02.09.03.25.03.12.04.28.04.18.05.03.06.22.06.08.07.26.07.11.08.29.08.14.09.30.09.18.10.03.11.22.11.08.12.27.12.23.01.08.02.27.02.16.03.Figure 6.
260% Dow Jones Industrial Average 240% NASDAQ Composite The RTS Index 220% 200% 180% 160% 140% 120% 100% 80% Corporate news.
The OAO LUKoil LUKoil Overseas, the operator of the LUKoil international upstream projects, has signed a takeover agreement with Chaparral Resources, Inc. company. In the case LUKoil Overseas meets all preliminary requirements set by this agreement, it should purchase all shares in Chaparral Resources, Inc.
now in circulation. This agreement was approved by the special committee of the Board of Directors of the Chaparral Resources, Inc., which consists of independent directors of this company. The recommended purchase price amounts to US $ 5.80 per 1 share, what includes a 12.3 per cent premium on the average price of these stocks registered over the last 30 days. The special committee of the Board of Directors of the Chaparral Resources, Inc. received the report of its financial advisor - Petrie Parkman company - that the purchase price is fair in financial terms.
The total amount of funds to be spent for the purchase of the shares in Chaparral Resources, Inc. not belonging to LUKoil should make US $ 88.6 million, what corresponds to the value of purchased confirmed oil reserves - US $ 8.10 per barrel. It is expected that the transaction will be finalized this May.
The legal advisor of the transaction is Akin, Gump, Strauss, Hauer & Feld, the financial advisor is Aton Capital. At present, LUKoil Overseas indirectly owns 60 per cent of the shares in Chaparral Resources, Inc. This block of shares was purchased yet in December of 2005 among other assets of the company Nelson Resources Limited. The rest of shares in Chaparral Resources, Inc. are traded on the open market. LUKoil is carrying the consolidation of assets of Chaparral Resources, Inc. with the purpose to obtain the full control over this company and streamline its management system.
The OAO Mosenergo On Thursday, March 2, there was held the placement of the Ruble denominated bonded loan of the Mosenergo OAO. The amount of the placement made RUR 5 billion, the rate of the 1st through 12th coupons makes 7.65 per cent, the terms of maturity of the issue is 10 years. This bonded loan was made by the Mosenergo OAO in order to refinance its debt liabilities and optimize the financial operations of the company. The placement of the loan was carried out by Gazprombank AG (ZAO) at the Stock Exchange MICEX (ZAO). The ranking agency Standard and PoorТs assigned the loan the ruBBB+ rating.
The OAO Rostelekom At the end of March, the OAO Rostelekom informed about the decision of the ranking agency Standard and PoorТs to raise the long term credit rating of the company from УB+Ф to УBB-У with a stable 01.02.22.02.14.03.04.04.25.04.14.05.03.06.24.06.15.07.05.08.26.08.16.09.07.10.28.10.18.11.09.12.30.12.23.01.13.02.03.03.24.03.forecast. As it was said in the report of the Standard and PoorТs, the raise of the credit rating of the OAO Rostelekom had facilitated the further consolidation of the financial standing of this company resulting from the positive results of its operations and low levels of indebtedness. The Standard and PoorТs ranking agency had positively evaluated the stable operation results demonstrated by the company and the efficient measures the managers of Rostelekom had undertaken to reduce the companyТs costs, which had been aimed at the support of high profitability level. At the same time, the further reduction of the tax burden and the positive available money flow facilitated the support of the high level of liquidity of the company. According to Standard and PoorТs, the OAO Rostelekom would maintain its high level of solvency and low levels of financial risks in the short term and medium term outlook, what answers the requirements Standard and PoorТs sets in order to assign to a company the УstableФ forecast.
Table 1.
Dynamics of international stock market indices Change within the Change since the Data as on March 28, 2006 Value month (in %)8 beginning of the year (in %) RTS (Russia) 1414,70 -2,67% 18,85% Dow Jones Industrial Average (USA) 11154,54 1,47% 2,83% Nasdaq Composite (USA) 2304,46 0,08% 2,71% S&P 500 (USA) 1293,23 0,98% 1,93% FTSE 100 (UK) 5935,70 2,49% 4,47% DAX-30 (Germany) 5890,63 1,63% 8,09% CAC-40 (France) 5149,99 2,99% 8,31% Swiss Market (Switzerland) 7972,90 1,02% 4,51% Nikkei-225 (Japan) 16690,24 2,99% 2,01% Bovespa (Brazil) 36682,00 -4,99% 9,48% IPC (Mexico) 18929,98 1,20% 5,60% IPSA (Chile) 2171,43 0,21% 11,95% Straits Times (Singapore) 2513,57 1,27% 6,09% Seoul Composite (South Korea) 1331,31 -2,94% -4,17% ISE National-100 (Turkey) 41742,09 -11,22% 4,90% Morgan Stanley Emerging Markets Free Index 771,457 -1,36% 9,11% The Foreign Exchange Market.
In March, on the domestic forex market there was observed a certain Ruble appreciation against the US dollar, what was to a considerable degree determined by the dynamics of the world forex market.
In the beginning of the month, the fluctuations of the US dollar against the Euro on the world market of currency were insignificant. At the same time, on the Russian market the US dollar depreciated due to the lack of ruble denominated liquidity on the interbank market, what forced the market operators to sell the US currency. Later, the US dollar began to appreciate again. However, in spite of the holidays, the activity of the market operators was registered to be at a high level. In the beginning of the second half of the month the trend towards the appreciation of the US dollar was replaced by the opposite trend, therefore, the Ruble could appreciate again. Over the last but one week of March, the US Dollar could regain its previous position with respect to the major world currencies in the result of the publication of good news about the macroeconomic statistics of the USA and the declining apprehensions of the end of the cycle of increase in the base interest rate in the USA. Such dynamics automatically facilitated the appreciation of the US dollar and the depreciation of the single European currency against the Ruble.
By the end of the month, in the period from March 1 till March 29, the US $ depreciated by RUR 0.319 (by 1.14 per cent) and made RUR 27.80 per US $. In accordance with the IET forecasts (See the Bulletin of model based estimates of short time forecasts of the RF social and economic indicators, February of 2006, IET), by the end of March the US dollar exchange rate should be registered at RUR 27.93 per US $. The aggregate volume of trade in the US Dollar at the SELT in the period from March 1 till March 24 made about US $ 33.87 billion; over this period, the average daily turnover made US $ In relation to the levels registered on February 28, 2006.
1.99 billion (as compared with US $ 30 billion and US $ 2 billion registered in the respective period of February). In March, the maximal amount of trade with the US dollar was registered on March 10 and made about US $ 2.7 billion, whereas the minimal amount of trade was observed on March 20 (US $ 1.36 billion).
This March, the Ruble liquidity in the banking sector demonstrated an insignificant decrease in comparison with the figures registered in February of 2005: the average balances of correspondent accounts of credit organizations with the Bank of Russia made about RUR 325.3 billion as compared with RUR 327.7 billion registered in February. In spite of these developments, the amount of liquidity is still at a rather high level.
Figure 7.
Dynamics of the Official USD/RUR and EUR/RUR Exchange Rates in 2005-40.39.Official USD/RUR exchange rate 38.Official EUR/RUR exchange rate 37.36.35.34.33.32.31.30.29.28.27.Figure 8.
Dynamics of the Dollar/Euro Exchange Rate on the International Markets 1.1.1.1.1.1.roubles 01.02.16.02.03.03.18.03.02.04.17.04.02.05.17.05.01.06.16.06.01.07.16.07.31.07.15.08.30.08.14.09.29.09.14.10.29.10.13.11.28.11.13.12.28.12.12.01.27.01.11.02.26.02.13.03.28.03.USD/EURO 01.02.03.03.02.04.02.05.01.06.01.07.31.07.30.08.29.09.29.10.28.11.28.12.27.01.26.02.28.03.In the period from March 1 till March 29, the exchange rate of the Euro against the US $ on the world market increased by US $ 0.017 (by 1.4 per cent) and made US $ 1.204 per Euro. In March, on the background of the favorable dynamics of the forex market the European currency also appreciated with respect to the Ruble. In the period from March 1 till March 29, the European currency appreciated against the Ruble by RUR 0.069 (by 0.21 per cent) from RUR 33.329 per Euro to RUR 33.39 per Euro. The aggregate turnover of trade at the SELT amounted to Euro 328.9 million in the period from March 1 till March 24, while the average daily turnover was registered at about Euro 19.35 million (about Euro 372.03 million and Euro 21.8 million in February). Therefore, over the period under observation there was registered a significant decline in the amount of trading with the European currency on the Russian forex market. In March, the maximal amount of trade with Euro was registered on March 13 and made Euro 34.36 million, whereas the minimal amount of trade was observed on March 16 (Euro 11.599 million).
Table 2.
Financial Markets Indicators Month November December January February March* Monthly inflation rate 0,7% 0,8% 2,4% 1,7% 0,9% Inflation rate annualized on the basis of this month's 8,73% 10,03% 32,92% 22,42% 11,5% trend CB RF refinancing rate 13% 12% 12% 12% 12% Annualized yield to maturity on OFZ issues (%) 6,55% 6,53% 6,04% 6,53% 6,7% Volume of trading in the secondary GKO-OFZ market 24,58 34,80 32,33 9,81 25,for the month (RUR billion) Yield to maturity on Minfin bonds at the end of the month (% p.a.) 5th tranche 5,26% 5,27% 5,20% 5,39% 5,5% 6th tranche 4,77% 4,71% 4,50% 4,46% 4,6% 7th tranche 5,29% 5,37% 5,14% 5,35% 5,6% 8th tranche 4,58% 4,71% 4,38% 4,69% 4,5% Yield to maturity of Eurobonds at the end of the month (% p.a.) 2005 5,02% 5,00% 5,13% 5,34% 5,4% 2007 5,08% 5,07% 5,00% 5,19% 5,3% 2010 5,65% 5,67% 5,76% 5,66% 5,9% 2018 6,02% 6,08% 6,12% 5,93% 6,2% 2028 5,47% 5,50% 5,62% 5,37% 5,8% 2030 8,50% 4,25% 8,86% 6,31% 6,19% INSTAR-MIACR rate (% p.a.) on interbank overnight 28,7312 28,7825 28,1207 28,1223 27,loans at the end of the month Official RUR / US$ exchange rate at the end of the 33,9890 34,1850 34,0373 33,3305 33,month Official RUR / Euro exchange rate at the end of the 1,08% 0,18% -2,30% 0,01% -1,28% month Average annualized growth in RUR / US$ exchange -1,57% 0,58% -0,43% -2,08% 0,43% rate Average annualized growth in RUR / Euro exchange 778,05 683,99 1095,19 886,05 rate Volume of trading at the stock market in the RTS for 1037,26 1125,60 1315,96 1453,44 the month (US$ million) Value of RTS-1 Index at the end of the month 10,94% 8,52% 16,91% 10,45% 1,15% * Estimate D. Polevoy Investment in the real sector of the economy In 2005, the amounts of investment in fixed assets made Rub. 3431 billion, and increased by 10.per cent in comparison with the figures registered in the preceding year. As concerns the economic growth in 2004 and 2005, the principally new development was the shift towards the financing of investments in fixed assets at the expense of growing attraction of borrowings. The redistribution of investment flows was accompanied by the growing role played by the sector of services. In 2005, the share of investments in transport and communications in the total amount of investments in fixed assets made 28.8 per cent and increased by 3.8 p. p. in comparison with the figures registered in the respective period of the preceding year. As compared with 2004 figures, there was observed a decline in the rates of investment activity and the export oriented extractive sector, whereas the share of manufacturing industries oriented towards the domestic market increased.
One of the specific features of the development of the Russian economy over the last 6 years was the outpacing rates of growth in investment in fixed assets in comparison with the GDP dynamics and the output of base sectors of the economy. In 2005, the amount of investments in fixed capital increased by 10.5 per cent in comparison with the figures registered in the preceding year and made 3431 billion rubles.
The principally new factor of economic growth in 2004 and 2005 was the shift from the financing of investments in fixed assets at the expense of own funds of enterprises and organizations to the expanding participation of borrowed funds. It was a graphic illustration of the qualitative changes occurring in the mechanism of investment development oriented towards the rationalization of flows of investment resources. In 2005, the share of borrowed funds amounted to 52.3 per cent of the total amount of investments in fixed assets, what corresponded to the figures registered in 2000, when there was observed the peak of investment demand in the whole period of recovery growth.
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