The stock market
In December, the MICEX Index grew by 6% to 514.71 points, while the MICEX 10 Index went up by 4% to 1009.28 points. The common shares of Sibneft went up by 19%, the common shares of Norilsk Nickel - by 11.5%, the common shares of Surgutneftegaz - by 9.8% and the common shares of Rostelecom - by 5.5%. Also grew the common shares of LUKoil (+4.7%) and RAO UES (+6.6%). The common shares of YUKOS dropped by 9%.
The total turnover of operations in stocks amounted to 201.34 billion rubles. As compared with November, the average daily turnover of trading decreased by 8.7% to 9.59 billion rubles. In December, the volume of REPO operations in stocks reached 24.31 billion rubles or 12% of the total turnover of operations in stocks (in November - 13.6%). The turnover of operations concluded in the negotiated deals mode grew 1.6 times to 28.89 billion rubles, which is 14.4% of the total turnover of operations in stocks (in November - 9.2%).
The market of corporate and regional bonds
In December, in the sector of corporate and regional bonds there was noticeable increase of investors' activity, while the price of most liquid issues went up. As a result of the month, the total volume of transactions in corporate and regional bonds amounted to 66.92 billion rubles, of which 5.43 billion rubles (8.11% of the total turnover) was accounted for by primary placements, 51,24 billion rubles (76.57%) - by secondary trading and 10.25 billion rubles (15,32%) - by REPO transactions. In December, leading positions in the structure of the exchange turnover were held by corporate bonds - 40.68 billion rubles (60.79% of the total turnover). Subfederal (regional) and municipal bonds accounted for 25.28 billion rubles (37.78%) and 0.96 billion rubles (1.43%) correspondingly. As compared with November, the total volume of trading in the sector of corporate and regional bonds increased by 24.04%.
In December, the yield of most liquid issues of corporate and regional bonds decreased noticeably. In particular, the yield of Mosgorzaim bonds (the 29th issue) decreased by 1.47 points, the yield of Mosgorzaim bonds (31st issue) decreased by 1.62 points, the yield of the bonds of Tver region decreased by 2.65 points, the yield of RAO UES bonds decreased by 2.29 points, the yield of ALROSA bonds (the 19th issue) decreased by 2.40 points, and the yield of UralSvyazInform bonds (6th issue) decreased by 2.18 points.
The government securities market
In December, the market of GKO/OFZ demonstrated increased activity. The trading volume in the secondary market amounted to 20.93 billion rubles (4 times more than in November). The volume of operations in OFZ/FD reached 12.18 billion rubles, in OFZ/AD - 8.59 billion rubles, in OFZ/PD - 0.1 billion rubles, in GKO - 0.01 billion rubles, and in BMR securities - 0.05 billion rubles. The price of almost all issues of government securities went up. The yield of liquid issues of OFZ/FD in the secondary market decreased by 0.6-3.7 points, the yield of OFZ/AD issues decreased by 0.2-0.8 points.
In December, 5.19 billion rubles (with NKD) was attracted through auctions held by the RF Finance Ministry. In particular, three tranches of OFZ/FD 27020 were placed to the total sum of 1.14 billion rubles, two tranches of OFZ/FD 27019 to the total sum of 0.43 billion rubles, two tranches of OFZ/AD 46001 to the sum of 2.72 billion rubles, as well as issue OFZ/AD 46002 to the sum of 0.67 billion rubles, issue OFZ/AD 46003 to the sum of 0.05 billion rubles, and issue OFZ/PD 26198 to the sum of 0.17 billion rubles. The average weighted yield at auctions was generally slightly higher than in secondary trading. At 25 December exchange modified REPO auction to place issue OFZ/PD 26197 with the volume being equal to 20 billion rubles, the volume of placement amounted to 13.17 billion rubles.
The foreign exchange market
In December, the exchange rate of the ruble to the dollar grew by 42.2 kopecks (1.4%), while the exchange rate of the ruble to the euro dropped by 1.23 rubles (3.5%). On Tuesday (30 December) the exchange rate of the dollar with today settlements in the UTS reached 29.3139 rubles/dollar, while the exchange rate of the euro reached 36.7236 rubles/euro. The end of the reporting period and the expectation of the New Year break in trading affected the activity of participants: the average daily turnover in dollar-denominated instruments grew to 942.5 million euros, in the euro - to 6.9 millin euros a day. The total turnover of the foreign currency market increased by 69% and reached 19.8 billion dollars, of which 84% was accounted for by cash transactions and 16% - by SWAP operations. The increase of the sale of foreign currency export receipts by 94% caused the increase of the volume of operations in the UTS: its share grew from 42 to 48%. The afternoon session accounted for 52% of the total volume of trading in the foreign currency market.
The standard contracts market
In December, the total turnover of trading in futures contracts on the US dollar amounted to 492.9 55 million rubles or 16715 contracts. The daily average turnover of trading grew 2.7 times over November and reached 23.5 million rubles. The volume of open positions as of the end of December amounted to 8130 contracts, having increased 2.2 times over the end of November. Of the total number of open positions 4180 positions are accounted for by January 2004 contract, 2510 - by February 2004 contract and 1440 - by March 2004 contract.
Comment on the situation
Valeri Petrov, Deputy CEO of the MICEX
December was very favorable to all sectors of the Russian financial market, which was the result of positive economic and political factors.
The results of the election campaign proved the stability of the country's political course, and foreign investors began to buy more Russian securities, hoping they would continue to growth in 2004.
Economic results show the high growth rate of the Russian economy in 2003. It is expected that in 2004, the rate of the GDP growth will exceed 7%, while inflation will stay within 12% (which corresponds to the budget figures). According to the preliminary estimates of the RF Economic Development Ministry, the growth of investments in 2003 reached 11.2%, while the same figure for 2002 was only 2.6%. The growth of industrial production in 2003 is estimated at 6.7%. It is highly unlikely that in 2004 Russia will have problems with the servicing of its foreign debt.
Macroeconomic factors helped to strengthen the ruble relative to the US dollar. The decrease of the dollar and the growth of the euro in the Russian market were caused by trends in the world market, where the exchange rate of the euro to the US dollar continued to grow and reached, in late December, the record level of 1.26 dollars/euro. Positive information about the US economic growth, which was coming in December, helped to slow down the decrease of the dollar but did not change the overall situation. High oil prices in the world market are another factor that strengthens the ruble: the price of Urals has reached 27-28 dpb. The volume of export receipts coming into the country is high and the RF CB's gold and hard currency reserves are growing: in December they increased by over 14% and reached 77.8 billion dollar.
Export receipts secure the high level of liquidity in the banking system. In December, the total amount of balances in corresponding accounts reached 150 billion rubles, while in the last days of the month they exceeded 250 billion rubles. Rates of interest on 1-day MIBOR credits in the inter-bank credit market rarely exceeded 2%.
The high level of ruble liquidity helped to decrease the yield of both government and corporate debt securities. The foreign currency-denominated yield of most liquid corporate bonds reached about 18-20% of yearly interest. The rapid strengthening of the ruble in December (about 1.5 times as compared to the average yearly level) increased the attractiveness of ruble-denominated debt securities. The rapid growth of prices for corporate and regional bonds in December was caused, among other things, by the small volume of new placements. After the September liquidity crisis (which forced issuers to reconsider financial risks when placing securities) and immediately before the parliamentary elections many corporations put off their entry of the market. This is why the December volume of new issues was relatively small. At the same time, in the secondary market the investment demand grew considerably and decreased interest rates on corporate and regional securities.
Today, the yield of the most liquid medium-term (redemption within 2-5 years) securities has decreased to 10-13% of yearly interest (corporate bonds) and to 8-12% of yearly interest (regional bonds), which corresponds to the current inflation level. Further decrease of interest rates makes the yield on these instruments negative, which, in its turn, limits further price growth.
In December, the quotations of Russian indicative eurobonds with redemption in 2030 increased by 2.5 points to 96.25% of the nominal value. Rumors about S&P's possible upgrading of Russia's rating after 7 December elections played certain role in the growth of prices of Russian bonds. The market also received some support from the growth of the US securities. In late December, large operators showed growing demand for government securities of developing countries. Operators were storing them up before the Christmas and New Year holidays.
It is likely that in the beginning of 2004, the yield on corporate and regional bonds will continue to decrease, but the growth of prices will, most likely, be lower than in December.
