Daily Review. 5th September, 2007

On Wednesday, domestic plays opened flat, shrugging off upside on the U.S. stock market Tuesday. Throughout the session Russian equities headed south along with global indexes on growing fears that banks could report softer profits. By Wednesdays final bell, the RTS Index edged up 0.03% to 1,905.30 and the MICEX Index slid 0.55% to 1,654. O&G names looked mixed against the backdrop of marginal fluctuations in crude futures: Tatneft retreated 0.38%, Surgutneftegaz added 0.19%, Rosneft was up 0.12%, Lukoil eased 0.16%, Gazprom Neft dropped 0.78% and Gazprom ended 0.38% lower. Sberbank emerged as the top decliner on MICEX, with commons and prefs down 2.26% and 2.16%, respectively. The lenders stocks dropped on investors fears about softer profits in the banking sector due to the liquidity crisis that hiked interest rates for financial resources attracted by many banks: Wednesday the Japanese finance minister said that the countrys banks have been suffering losses because of the liquidity crunch. In our opinion, investors fears about Sberbank are exaggerated, as the lending institution raises the bulk of its resources on the domestic market and their value was only marginally impacted by the liquidity crisis. VTB stocks tumbled only 0.59%. At present, they trade 13% below the placement price and there are quite a few investors willing to divest their holdings. The common/pref spread of UES stocks widened as the energy holdings commons lost 0.73% and prefs retreated 1.33%. According to our forecasts, the spread should narrow, as underscored by the earlier determined stock buyback prices for investors opposed to the utility concerns reorganization. Other liquid names performed on MICEX as follows: Norilsk Nickel edged up 2%, MTS pulled back 2.02% and Rostelecom gained 0.55%. On the upside, we would like to highlight Transneft among less liquid stocks, up 5.66% on MICEX thanks to speculations on rumors about the resignation of its CEO Semen Vainshtok. Market turnover jumped to $69 mln on the classical market of benchmark RTS and fell marginally on MICEX to $7,343.83 mln.

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[Source: Russian Stock Market Blog]