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Reports Russia

Russian stock market daily evening report (August 11, 2014, Monday)

August 11, 2014, Monday, 16:19 GMT | 11:19 EST | 19:49 IST | 22:19 SGT
Contributed by Veles Capital


Market today. Western investors' sentiment was affected by the end of military training of the Russian air force and defense in Astrakhan Region. Massive relocation of air force last week closer to the border with Ukraine (the training ground wAs just 600 km away from the border of Ukraine) concerned the US and EU. At the back of the start of military training, the western mass media started active discussions on the rumor that Russia is preparing to invade Ukraine. Today, after a week long reduction of the European indices and return of the Russian air forces back to regular dislocations, the European shares showed mild adding.

The decision of MSCI inc. to keep the shares of Sberbank and VTB as a part of the MSCI Russia index was the key subject at the Russian market. Last week the given matter was the most important one for the Russian traders, after the foodstuffs' import restriction issues. For now the investors are forced to focus on the issues of food inflation and the future loss of the retail companies.

Market tomorrow. The issues that are directly related to the military action in the EastUkraine are no longer in focus of the media. Given actually is important and a positive indicator for the financial market. Today the chairperson of the European Commission Barrows will conduct negotiations with Vladimir Putin and Petr Poroshenko. We expect no serious statements to be done regarding given negotiations.

We assume that despite growth of the European and Russian shares, the foreign background remained negative. Last week we witnessed deceleration of the industrial growth in Germany and Italy having entered recession. Given factors will be making a negative impact on the Russian economy in the midterm prospect as Europe is the largest consumer of the Russian export. Reduction of the growth rates of the economies in EU would be cutting the demand of products to be delivered to the Union. Given factor might lead to further deceleration of the Russian economy and reduction of the Russian stocks quotes.

Growth of GDP of Russia for 2Q 2014 slowed down to 0.08% in annual terms. Notes that reduction of import leads to growth of GDP, as when calculating the given estimate the cost of import is to be cut from it. The annual import of products that are currently prohibited formed about 10-12 bn USD per year or 2.5-4 bn USD per quarter. Concluding from the fact that the quarter report of GDP of Russia formed 500 bn USD, we might expect the given estimate to grow 0.5-0.8% simply from limiting import of products. Considering the fact that a share lacking foodstuffs would be bought in the other states (China, Byelorussia, Kazakhstan, etc), than the net adding of GDP would definitely be below the numbers that we projected.