• Russian stock market daily evening report (September 21, 2015, Monday)


    The foreign background developed favorably for the Russian market. The oil quotes showed growth after the Friday evening release of numbers on reduction of the drilling volumes in the US. Growth indicated at the global exchange grounds after profit fixation that followed the session of Fed late last week. European indices grew benefiting from the news from Greece, as SIRIZA, headed by Alexis Tsipras, is winning the election with an unexpected rate of 35.47%, meaning that Tsipras might return to the seat of the prime-minister, having formed a coalition with his partner – Independent Greeks party. Despite the positive background, the Russian market showed significant improvement, initially due to the oil sector’’ notes (LUKOIL mostly) – alarms of the investors grew due to the news on the Finance Ministry having offered to switch to ruble withholding in calculations of MET. It has been offered to apply average dollar exchange rate for 2014, corrected by inflation, in accounting the minimal price not to be a subject of taxation (currently the given price forms 15 USD per barrel). Adopting given measure leads to a serious decrease of the Russian oil companies’ financial results as the change will cost up to 10% of the companies’ EBITDA in 2016. Unexpected change in the tax legislation is a generally negative signal for investors. Supposed measures might lead to the companies shutting down new projects, initially that would be small and middle size deposits. The oil processing industry might also suffer from the new formula: reduced margin of oil-processing plans will make upgrading them complicated. At the meantime, the press secretary of the President of RF has indicated that “there are no exact discussions on the subject, thus there no decisions made already”. We assume the long-term negative impact of such a decision exceeds any short-term benefits for the budget from it, thus the change is unlikely to be made. As for the Russian note, the following topped the market: FSK UES, Russian Grids, MosEnergo, KAMAZ, and MMK. The following have underperformed the market: E.ON Russia, LUKOIL, Rosneft, Tatneft, and SOLLERS. PhosAgro and preferred notes of Tatneft and Bashneft are slipping after the notes have been included into the FTSE Emerging and Market Vectors Russia due to profit fixation in them.

    We assume that the market’s reaction to the news on possible changes in oil industry’ taxation is of temporary nature and under the current conditions we recommend buying the shares of LUKOIL. Aside that, we assume that the markets’ reduction after the Fed’ session results had been announced was a sort of profit fixation process, meaning that in the nearest outlook the foreign background would be positive for the Russian market.


    The debt market started the week calmly. Despite having no new drivers, the ruble loans continued upping in price. The OFZ curve lost 5-8 bps for the day. Buying in the corporate segment occurred in the loans GTLK MB-4 and RusHydro-2. Eurobonds reduced for the day. Russia-43 lost 40 bps and formed 97.95% of the nominal, Russia-23 – added 10 bps to 99.45% of the nominal.

    The foreign conjuncture remained unchanged on Monday, therefore, we see no reasons for forming of any expressive dynamics on Tuesday. Aside that, in case the oil quotes’ growth resumes, the Russian market might gain not bad support from it.

    FX market

    Early this week, ruble has tried to win back a share of Friday loss, however, the motion faded near the level of 66 RUB, after that dollar has returned to the level of 66.2 RUB.

    Tuesday, aside volatility that has recently become usual at the oil market, the situation at the currency market might be corrected by the volume of the limit at the direct REPO auction with CBR. Large tax payments are coming up and banks would require at least 1.5 trillion RUB at the auction tomorrow. In the opposite case, lack of assets at the auction would force a hard remand of ruble liquidity, which would be favorable for the Russian currency (last week the limit formed 1.1 trillion RUB).

    Contributed by Veles Capital
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