In the first half of October the market showed noticeable growth. By 17 October, the MICEX Index reached the maximum level of 583,10 points. Then, in the second half of the month, there was considerable market downturn. As a result of the month, the MICEX Index decreased by 9% to 468,85 points. The blue chips that dropped the most were the common stock of YUKOS (-23,4%) and RAO UES (-22,1%). Other stocks that went down were the common stock of Sberbank (-3,9%), LUKoil (-2,6%) and Mosenergo (-1,7%). The common stock of Surgutneftegaz went up by 5,8%, Rostelekom - by 4,1% and Norilsk Nickel - by 2,5%.
Market participants' activity in October was considerably higher as compared with September. The total volume of trading in stocks grew by 36% to 334,5 bln rubles, while the average daily volume of trading amounted to 14,54 bln rubles. In October the volume of REPO operations in stocks reached 42,97 bln rubles, which amounts to 12,85% of the total volume of operations in stocks.
The market of corporate and regional bonds
In October, the market of corporate and regional bonds experienced considerable price fluctuations. Participants' activity was high enough during the whole month. As a result, the total volume of operations in corporate and regional bonds in the MICEX Stock Market Section reached 76,93 bln rubles, exceeding September results by 37%. In October, the volume of secondary trading in these instruments amounted to 53,44 bln rubles (69,47% of the total trading volume), the volume of auctions reached 11,81 bln rubles (15,35%) and the volume of REPO operations - 11,68 bln rubles (15,18%). In the overall turnover, the share of corporate bonds reached 55,03%, the share of subfederal (regional) bonds reached 44,11% and the share of municipal bonds - 0,86%.
In the first half of October, prices of corporate and regional bonds were growing steadily: yield on most liquid issues decreased by 1,5-3,0 points. In the second half of the month the situation changed and the price of most bonds dropped noticeably. As a result of the month, the drop in rates appeared to be inessential: by 0,5-1,0 points on average. Yield on the bonds of the Government of Moscow (the 30th issue) decreased by 0,93 points, on the bonds of the Government of Moscow (the 25th issue) - by 0,90 points, on Gazprom bonds - by 0,71 points, on TNK bonds (the 5th issue) - by 1,12 points and on ALROSA bonds (the 19th issue) - by 0,30 points.
The government securities market
In October, the volume of secondary trades in the GKO/OFZ market reached 14,12 bln rubles, 9,7% more than in September. The OFZ-AD sector accounted for 6,53 bln rubles, the OFZ-FD sector - 6,63 bln rubles. At the Finance Ministry's auction to place GKO issue 21171 of the nominal value of 5 bln rubles (with demand being worth 4,2 bln rubles), the volume of placement amounted to 1,08 bln rubles. Central Bank sold 490 mln rubles worth of securities from its portfolio. Direct REPO operations against the Bank of Russia accounted for 73% of the total volume of trading (45,9 bln rubles). Yield on OFZ-FD issues changed within the range of -1,4 to +0,2 points and amounted as of the end of the month to 5,7-6,5% of yearly interest. Yield on OFZ-AD issues decreased by 0,2-0,7 points to 7,5-8,6% of yearly interest.
The Standard contracts market
In October, the market of futures for the US dollar exchange rate was restarted in the MICEX standard contracts market. Firm buy and sell quotations are supported by Sberbank, PSB, MDM, Metalinvestbank, MAB, Konversbank and Tsentrokredit. In October, the total volume of trading in contracts amounted to 186,88 mln rubles (6255 contracts). The volume of open positions as of the end of October was over 2 mln dollars.
The foreign exchange market
In October, the exchange rate of the ruble to the US dollar grew by 66 kopecks (2,1%), to the euro - by 81 kopecks (2,3%). On Friday, 31 October, the exchange rate of the US dollar with today settlements in UTS reached 29,9338 rubles per 1 dollar, the exchange rate of the euro - 34,7689 rubles per 1 euro. Russia's achieving the investment grade credit rating affected participants' activity: the average daily turnover in dollar-denominated instruments grew to 753 mln dollars, in the euro - to 6,6 mln euros a day.
The total turnover of the foreign exchange market grew by 28% and amounted to 17,3 bln dollars, of which 82,6% was accounted for by cash transactions and 17,4% - by SWAP operations. With the increase of the sale of hard currency export receipts, the volume of operations in UTS increased by over 70%, its share growing from 35,4 to 47,2%. The afternoon session turnover accounted for 52,8% of the total volume of trading in the foreign exchange market.
Comment on the situation
Valery Petrov, MICEX's Deputy CEO:
In October, the processes of price formation in the Russian financial market were determined by two main factors: the upgrading of the country's credit rating by Moody's Investors Service to Baa3 level and events around YUKOS. These two factors accelerated the growth of prices for stocks, government, corporate and regional bonds in the first half of the month and caused them to go down in the second.
The upgrading of Russia's credit rating exerted considerable influence upon the dynamics of the exchange rate. The expected inflow of foreign capital triggered bull transactions in the ruble. The growth of the nominal exchange rate of the national currency to the US dollar reached almost 2,1%, which increased participants' interest in ruble-denominated securities. The considerable decrease of the exchange rate of the euro against the ruble (in October - almost by 2,3%) was provoked by the situation in the international FOREX market, where in the second half of the month the US dollar grew from 1,18 to 1,16 dollars per 1 euro as a result of positive information on the US economy.
During almost the whole of October, the high enough level of liquidity in the banking system was favorable for the stock market. If in September the average daily volume of balance on commercial banks' correspondent accounts amounted to 105 bln rubles, in October this figure grew to 119 bln rubles. At the same time, the average daily rates on overnight loans decreased from 8,5 to 5,4% of yearly interest. The growth of liquidity in the banking system increased the investment activity and demand for securities.
In October the foreign trade situation was favorable for Russian securities. High oil prices combined with the expected growth of oil consumption in North America and Europe in early October (the beginning of heating period) increased quotations in the sector of oil securities in the Russian market. In October the average price of Brent came close to 29 dollars per 1 barrel (26,80 dollars in September).
During the whole month situation in world financial markets was quiet enough. Most of stock indexes were growing steadily: DJIA went up by 5,7%, NASDAQ - by 8,2%, FTSE-100 (Great Britain) - by 4,8%, and DAX (Germany) - by 9,8%. The growth of stock indexes was the result of the restoration of the US economy, where the growth of production combined with the decrease of unemployment.
Although situation in the world debt market was not as favorable as in the stock sector, there were no big jumps in prices similar to those that happened in spring and summer. The acceleration of the US economic growth encouraged bearish speculation in the bonds market, where interest rates were growing. As a result, in October yield on 10-year Treasuries grew by 0,37 points.
In November, the coming parliamentary elections are likely to affect the Russian financial market. Some of the most cautious investors may be expected to assume the wait-and-see position and refrain from active movements.
