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Russian stock market daily evening report (August 06, 2014, Wednesday)

August 6, 2014, Wednesday, 18:08 GMT | 13:08 EST | 22:38 IST | 01:08 SGT
Contributed by Veles Capital


Stocks

Market today. European and American stock indices are trading in the red zone today – the negative sentiment dominates the western stock indices. Mainly reduction of the European Indies is explained by weak macroeconomic data: industrial orders in Germany had unexpectedly reduced for June by 3.2% mom, while 0.9% mom growth was expected. At that, reduction of orders in the industry of Germany is indicated for the second month straight. Industry of Germany is the largest one in Europe; therefore, data on industrial production of the state is quite an important indicator of the state of European economy.

Stock of Mechel was among the top losers at Moscow stock exchange after weak operation results have been posted for 2Q 2014. Selling of steel products of Mechel dropped 24% vs the previous year’s results, and selling of met coal – by 5% yoy. At that, the prices of met coal reduced to the lowest values for the seven recent years.

VSMPO-Avisma was losing in price due to alarms about suspension of deliveries of titan raw material from Ukraine. The risk of sanctions against the company is the other risk factor as the chairperson of the board is Sergey Chemizov, and sanctions against him as a friend of Vladimir Putin had been applied earlier.

Common and preferred shares of Sberbank were losing in price due to negative expectations. According to the messages in mass media, MSCI inc. is considering the opportunities of removing the stock of the bank from MSCI Russia. Given might force the index funds to cut their investments in the stock of Sberbank and further selloff in the stock of the bank. Note that the continuing reduction of Sberbank might indicate a fundamental negative re-estimation of the prospects of the Russian economy. As indicated earlier, when the investors and traders intended to bet on improvement of the situation in Russia, they bought Sberbank.

Stock of Bashneft is losing in price due to messages on Rosneft possibly buying the oil company. The experience of the deal with buying TNK-BP shows that Rosneft will likely not be buying back shares from the minority. Change of the principal holder of the company might lead to change of the dividend policy, and to the respective change of the fundamental cost of Bashneft.

Rusal continued climbing after the successful restructuring of the debt to western banks.

Uralkaliy and PhosAgro grew due to increased interest in the producers of fertilizers. Given was due to the seasonal character of demand for fertilizers: normally, sowing season starts at the north American continent in the late Fall, which leads to rise of demand for fertilizers and rise of sales of the producers of potassium and phosphate fertilizers.

Market tomorrow. We expect the negative sentiment to preserve at the Russian market: the situation at the East of Ukraine is getting hotter, while EU and US did not support the calls of Russia to Ukraine on cutting the number of innocent victims. Concluding from the statements by several European politicians, alarms in EU relating Russia trying to carry out a peace-making operation in Ukraine itself had just grown bigger.

Besides, a new problem is developing at the southern border of Russia: cinders of the Armenia-Azerbaijani conflict due to Mountainous Karabagh threats to burn hot again. Considering the fact that both parties of the conflict had upgraded their weapons for the past dozen of years, the situation might develop into a tragedy, which would force Russia to get involved in the conflict as a peace-maker in the region.