The stock market
In July, considerable price fluctuations took place in the stock market after almost three months of price growth. In July, the MICEX Index decreased by 5,8% to 430,30 points. The trading volume grew by almost 5% to 9,7 billion dollars. This was connected, mainly, with the 20% growth of the volume of REPO operations, which amounted to 1,3 billion dollars. The volume of secondary trades increased by 3% to 8 billion dollars, while turnovers at auctions decreased by 2% to 0,4 billion dollars.
Among the blue chips, the biggest decrease was registered in July for the common shares of YUKOS (17,71% decrease), Mosenergo - third issue (14,16%), Mosenergo (14,09%), UralSibBank (13,82%) and the preference shares of Transneft (12,90%). The biggest growth in July was shown by the preference shares of Krasnoyarskenergo (14,18% growth), the common shares of Krasnoyarskenergo (12,17%), Norilsk Nickel - fourth issue (10,33%), MGTS (9,16%), and Norilsk Nickel - fifth issue (7,82%).
The market of corporate, subfederal (regional) and municipal bonds
Due to the instability of the market and the considerable growth of interest rates on government securities, there was some decrease of investment activity in the sector of corporate bonds, where, in July, the total volume of transactions decreased by 5% to 1,47 billion dollars.
In July, considerable drop in prices took place in the secondary market of corporate and subfederal bonds. The yield of medium-term instruments (redemption within 2-5 years) grew by 2-4 points, reaching 11-15% of yearly interest for most liquid securities. The yield of short-term instruments (redemption within 1 year) reached 7-10% of yearly interest, having increased by 1-2 points on average.
The government securities market
In July, in the market of government bonds, a local correction took place after almost three months of continuous growth of quotations. As a result, the yield of the most liquid issues of Federal bonds grew by 1-2 points to 8,0-9,5% of yearly interest, while the volume of secondary trades decreased about 2 times against June - from 1,3 billion dollars to 0,6 billion dollars. At the same time, problems with liquidity, which arose in the second half of the month, boosted the volumes of operations of direct REPO against the Bank of Russia, which grew about 9,5 times to 1,6 billion dollars. As a result, the volume of exchange trades decreased insignificantly - by about 8%, reaching 2,4 billion dollars.
The foreign exchange market
The favorable situation in foreign trade helped to maintain the big supply of hard currency. In July, the exchange rate of the US dollar decreased by 7 kopecks from 30,35 rubles/1 dollar to 30,28 rubles/1 dollar. In July, the volume of transactions on the MICEX currency market increased by 3% against June, reaching 12,9 billion dollars. The biggest growth (about 29%) was registered for dollar/ruble SWAP transactions. Interest in these operations was connected with the local shortage of liquidity in the banking system, which took place in the second half of the month.
Comment on the situation
A rather strong correction in the market of government, subfederal and corporate securities was caused, on the one hand, by technical factors (the market was outbidden) and, on the other hand, by growing instability in foreign financial markets. The large-scale bear speculation was triggered by market participants' apprehension for the revision of the results of the privatization. In the course of the correction, the capitalization of the Russian stock market decreased significantly. Nevertheless, the stable political situation in the country, the favorable economic situation and the remaining considerable undervaluation of Russian securities, compared to their foreign analogs, provide tangible support to the domestic market. Certain rise in the stocks sector, which was seen in late July, and the possibility of Russia's obtaining the investment rating in 2004 allow one to expect that the aftermath of the correction will be overcome and are the evidence of investors' remaining considerable interest in Russian securities.
