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Emerging Markets DatafileOctober 29, 2003
THE MOSCOW TIMES
RUSSIA
ENGLISH
Markets Shrug Off Monday Collapse, THE MOSCOW TIMES
Alex Fak
RUSSIA
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The arrest of Mikhail Khodorkovsky, talking here with his mother on Oct. 18, is being seen by many as an isolated problem.
Russian stocks bounced back in a big way Tuesday as investors dismissed the legal assault on Yukos as an isolated problem.
The benchmark dollar-denominated RTS index soared nearly 5 percent to close at 561.45 on relatively heavy volume of $39 million, while the ruble- denominated MICEX index rose 2.42 percent on nearly $400 million worth of trades, after losing 6 percent Monday.
The ruble, too, recovered most of the ground it lost in Monday’s panic, strengthening half a percentage point against the dollar to close at 29.93. The Central Bank’s $500 million buying spree the day before tightened liquidity, forcing banks to search for rubles to cover their end- of-month tax payments just as exporters were selling their revenues.
Traders said investors — both foreign and domestic — appeared to have decided that Monday’s massive sell-off, triggered by the weekend arrest of Yukos CEO Mikhail Khodorkovsky, was overblown, as were fears that the legal assault on Russia’s largest oil company might not be an isolated event.
“There is clearly some Western buying going on,” said Sam Barden, head of equity sales at Yukos-affiliated Trust.
Most observers polled said Monday’s dramatic decline might have produced a new barrier by which to gauge stability.
However, traders said much of the buying was done by hedge funds that buy and sell more aggressively than institutional investors, potentially increasing market instability.
“On the positive side, institutional investors at least did not sell,” said Pavel Naumenko of Renaissance Capital.
The market’s resilience left many analysts scratching their heads.
“People disregard what is potentially catastrophic news for Russia — its biggest CEO is thrown in jail,” said Nick Mokhoff, head of sales trading at Brunswick UBS. “Share growth happens on good news. But what is the good news that we’re expecting between now and the end of the year?”
Mokhoff said he expected share prices to “come back to reality” soon. “Should the market return to Friday’s levels, that would be irrational,” he said.
Prime Minister Mikhail Kasyanov tried to reassure the market Tuesday, but his enigmatic remark that “everyone, in their own way, should make efforts to restore the market” had little impact.
“If anything, Kasyanov is closer to the circles that are being pounded now,” Vladislav Oreshkin, economist at UFG, said, adding there is still too much volatility in the market and that it was far too soon to judge how the Yukos affair will play out.
The most significant development was the gain in market movers Yukos and its merger partner Sibneft, which together make up nearly a third of the RTS index by capitalization, said Ovanes Oganisian, technical analyst at Renaissance Capital.
After dropping so fast Monday that trading had to be suspended, Yukos shares closed up more than 3 percent Tuesday, gaining back part of the previous day’s 15 percent drop. Sibneft, which fell 13 percent Monday, closed up 2.5 percent, but its free float is so small that it means much less than movements in Yukos, Barden said.
Most analysts said little had changed in terms of Yukos’ fundamentals, but some were not quite sure.
“I don’t know why Yukos shares are recovering,” said Steven Dashevsky of Aton. “Maybe I’m missing something. Their CEO is in jail and key executives are out of the country or resigning from the company. Their management team is falling apart. Do you not think this company should fall in value?”
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