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"Russian Trading System" Stock Exchange (RTS)
19/03/2012 23/03/2012
During week 12 the Russian market showed a significant negative
trend. The main
index RTSI dropped by 4.24% (from 1748.32 to 1674.25); RTS Oil
& Gas Index(RTSOG) performed even worse with a decrease of
5.54% (from 227.90 to 215.38
points). Similar trends were observed also in other indexes.
It can be partially explained by the fact that the Russian
government plans to increase
the minimum reserve requirement for commercial banks: the new
figure is estimated
to be 1 billion RUR (around 26 mln EUR; the current number is
180 mln RUR (4.6
mln EUR)). This means that some of the existing banks will have
an increase in
volatility if they do not have enough reserves right now,
despite the fact that the
minimum reserve requirement has not been officially raised
yet.
Moreover, the financial market was made more unstable by the
decision of theRussian Central Bank to increase interest rates;
however, this increase had been
expected before. As a result, the RTS Financial Index (RTSFN)
decreased by 3.59%
(from 334.23 to 322.24 points) during the previous week.
Week 12 has been the worst week in the RTS so far this year. All
companies which
are traded in the investment game12, lost their share values.
Among the biggest
losers were Surgutneftegas (SNGSS), with common shares down
8.26%, GMK
Norilskiy Nikel (GMKNS) lost 7.84%, and JSC VTB Bank (VTBRS)
recorded a
decrease of 7.27%.
This weeks best performers: RusHydro (HYDRS) -1.15%, Sberbank
(SBERS),common shares -2.64% and JSC Severstal (CHMFS) -3.63%.
JSC Severstal (CHMFS)
The market movements of this international steel producer are
worth watching in the
weeks ahead. Although Chinas economy is slowing down, and
Chinese government
is not planning to ease restrictions on real estate sector; iron
and steel industry should
remain stable or even improve in the second quarter. A
considerable number of
construction processes are being resumed due to warmer weather.
The slower growth
of China will most likely expand its demand for iron, and steel
prices will still remain
high at around 109.32 Euros.
Moreover, some positive signals are appearing in the Russian
market. Improvements
are expected in the construction industry in Russia, as the
Government plans to invest
282 billion Euros by 2015 in construction of 4 new nuclear power
plants. Thus, the
demand for iron will definitely go up in the domestic
market.
Severstal revenues have been growing steadily from 2010 Q4 till
2011 Q3 (the latest
Q available). In addition, Severstal has been able to keep their
net profit margins
higher (Q1 14.25%; Q2 14.66%; Q3 9.44% in 2011) than the average
margins in basic
material sector and iron and steel industry: 11.58% and 5.10%
respectively.
Companys next earnings announcement is going to be on April
19.
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The most recent downwards trend started in the middle of
February and now the share
price is close to the support line. In addition, RSI and the
Stochastic Oscillator show
low levels and signals that Severstal shares are oversold, and
during the next week itsshare price should increase.
Surgutneftegaz (SNGSS)
Last week the value of Surgutneftegaz common shares dropped by
8.26%, from
32.700 at the start of the week to 30.000 when closing on
Friday. This is quite a big
contrast to the previous week when the share value peaked at
33.525 and alsocomparing with the 19.91% increase in share price
over the last three months.
However, this is something that can be seen also in the previous
months, where it
recovered similarly after a plummet in share prices back in
August 2011, only to drop
again in December 2011, making the share quite volatile.
