Daily Review. 18th July, 2008

Thursday trading kicked off on external bullishness and later on was buoyed by strong financials released by JP Morgan Chase and US economic data that surpassed market expectations. As a result, Russian benchmarks finished the session firmly in the black, with the RTS Index gaining 2.21% and the MICEX Index adding on 2.95%. As fears about further write-downs subsided, financial plays were back in vogue on global markets. Domestic bank names were no exception, leading the advancers, as VTB surged 6.01% and Sberbank gained a hefty 6.28%. O&G plays headed north notwithstanding a continuing setback on energy markets, with Lukoil taking a 2.3% jump, Gazprom increasing 1.8% and Rosneft ending 3.7% higher. Norilsk Nickel posted advances for the second session in a row, up 3.7%, while Polyus Gold added on 2.5%. Robust demand was seen in steel issuers, as MMK grew 1.56%, NLMK advanced 2.08% and Severstal shot up 2%. After Wednesday’s nosedive, FGC bounced back up +4.2%. US stock indices again experienced upside Thursday fuelled by strong reports from two major banks, positive economic data and falling crude futures. Heading into the final bell Merrill Lynch released its numbers, whose write-downs beat analyst expectations, which eventually dragged American benchmark indices down. Asian markets are largely bearish this morning after American corporations posted weaker-than-expected financials. After a sharp decline to USD 129/bbl, oil futures posted modest advances, as some investors hedged their positions. At present, Brent contracts trades at USD 131 a barrel. A fractional correction is seen on the metal market. Friday’s morning news is ambiguous for the Russian equity market and we expect early trading to be extremely volatile. Bank names, after some upside, could correct down. O&G plays will likely remain under pressure of negative trends evolving on energy markets. Norilsk Nickel, whose stocks leapt on rumors about massive buying, stands a good chance to power ahead. Steel-making issuers could underperform the market.

Daily Review. 17th July, 2008

On Wednesday Russian stock indices moved south in the first half of day under pressure from negative trends on financial and commodity markets. However, Moody’s agency has lifted its rating of Russia from ‘Baa2’ to ‘Baa1’ elevated investor mood, allowing the stock indexes to close out in positive territory. As a result, the RTS index inched up 0.06% and the MICEX index gained 0.71%. Norilsk Nickel, up 5.4%, and Polyus Gold, up 4.7%, were top picks among investors during the entire trading session. Russian banking shares gained support from the robust 1Q 2008 financials posted by VTB. As a result, VTB advanced 2.4% and Sberbank closed out 0.8% higher. O & G plays posted soft gains despite the continuing correction in global oil prices: Lukoil added 0.3%, Gazprom was up 0.3% and Rosneft went up 1.3%. Steel names ended in the red despite the continuing upward trends in the sector: MMK shed 1.9%, NLMK finished 0.9% lower and Severstal pulled back 0.4%. Federal Grid Company shares emerged as the top loser, off 17.7%. On Wednesday, US stock indices turned bullish, with the benchmark indexes adding an average 2.5%. Financial names led the growth as a major mortgage bank reported strong financial results, which markedly outpaced expectations. Airline and transport shares outperformed the market amid a pullback in oil prices. Asian markets have adequately reacted to the events in the US, and are now trading higher. Following the release of information on oil reserves in the US, which exceeded expectations, oil futures retreated to USD 136 per barrel. Futures contracts for industrial metals underwent a slight correction on fears economic growth could slow. We view this morning’s news as upbeat for the Russian stock market. A steep rise in the market cap of US banks will likely have a beneficial impact on Russian financial stocks. Oil & gas stocks may come under pressure from declining prices for oil. Steel names may continue to suffer from a local shortage of demand. The market rally sparked off yesterday by the upgrades of Russia’s and Russian banks’ ratings may gain force today, despite the release of data yesterday on accelerating inflation in the US.

Daily Review. 15th July, 2008

Closing out in the red Friday, Russian stocks bounced back up Monday on external and domestic bullishness, with the RTS Index advancing 1.89% and the MICEX Index adding 2.74%. The day’s top gainers, notwithstanding a retreat in oil futures, were O&G plays, as investors expect new tax breaks for oil producers. As a result, Gazprom Neft leapt 6.3%, Rosneft spiked 5.1%, Lukoil jumped 4.5% and Gazprom rose 2.8%. Given some stability among US mortgage lenders, domestic bank stocks posted advances, with VTB edging up 1.7% and Sberbank climbing 2.6%. Weaker demand was seen in steel issuers, as MMK grew 1.2%, NLMK was up 0.9% and Severstal closed out 0.7% higher. Trading in utility stocks was mixed amid heavy volatility, as RusHydro added on 1.1%, TGK-2 shed 2.1% and OGK-3 slid 3.2%. U.S. benchmarks ended Monday in the red, with negativity coming from the financial sector. Reports appeared over the weekend that the state would buoy up two major mortgage lenders. Uncertainty over the entire financial sector, however, prevails. Asian stock indices are also drifting south today on fears the situation surrounding the financial sector will aggravate. After some strengthening of the dollar, crude futures came down a bit, hovering around USD 145 a barrel. According to our estimates, today’s morning news flow is downbeat for the Russian stock market. Bank stocks will again be under pressure from another wave of sell-offs in financial names on global exchanges. Record oil prices are capable, to a large extent, of keeping O&G plays from sliding. Yesterday an overwhelming majority of UES shareholders received the shares of the unbundled concerns, which will keep utility trading highly volatile. A serious impact on the trading pattern could be produced by US economic data, due out at 4.30 p.m. Moscow today. All eyes will be on PPI and retail sales in July.

Daily Review. 10th July, 2008

Russian equities kicked off Tuesday to the upside on the heels of an upswing in US stock indices and Bernanke’s statements support could be provided to financial markets. Be that as it may, weakness on commodity exchanges and the overall wary risk exposure of global investors allowed Russian indices to lock in gains intraday, with the RTS Index inching up 0.18% and the MICEX Index slipping 0.56%. O&G stories led the decliners among blue-chip names amid a downswing on global energy markets, as Lukoil plunged 1.8%, Gazprom dipped 1.2% and Rosneft lost 1.9%. Steel issuers remained on the sidelines with fractional fluctuations, with Severstal falling 0.4%, MMK advancing 0.3% and NLMK shedding 0.7%. Norilsk Nickel, off 3.4%, extended its losses against the backdrop of corporate squabbling. As predicted, financial names outperformed, with Sberbank climbing 1.4% and VTB edging up 0.2%. The heaviest casualty was Razgulyai, down 11.2%, after it announced the placement price at a big discount to the current stock prices on the market.The bears were back on the US stock market Wednesday on expectations the American economy would slow down substantially in Q4 2008. The S&P 500 Index pulled back over 2%, with financial companies again leading the losers. Notwithstanding a sell-off in US trading and slower growth of China’s exports, Asian benchmarks are trading mainly in the black this morning. Commodity markets stabilized and oil futures are hovering around USD 136-137 a barrel. Based on our estimates, today’s morning news flow is downbeat for the Russian market and we expect most liquid names to open to the downside. Financial plays could take a drop after Wednesday’s uptick. Oil and gas plays will most likely trade in synch with the market today. Abundant supply from former UES shareholders will continue to put pressure on utility stocks. Today Norilsk Nickel looks set to outperform on the back of rising global nickel prices.

Daily Review. 9th July, 2008

Liquid names headed downhill across the board on Tuesday. Statement by Fed chairman Bernanke that support could be provided to financial markets helped the domestic market curb losses, with the RTS Index edging down 0.64% and the MICEX Index giving up 0.85%. Galvanized by Bernanke's speech, financial plays outperformed the market, as Sberbank added on 1.1% and VTB slipped 0.5%. O&G stories drifted lower under pressure from a fall-off in global energy markets, with Lukoil shedding 2.2%, Rosneft dipping 1% and Gazprom ending 0.8% lower. Norilsk Nickel plunged 2.1% as confrontation between the metal giant's key shareholders intensified. Steel stocks looked stronger than the market, with NLMK advancing 0.4%, MMK leaping 0.5% and Severstal ending flat. Top decliners, as has been the case in the past few sessions, were utility concerns, as Mosenergo sank a painful 8.6%, RusHydro plummeted 6.2% and OGK-3 dove 3.9%. After a lengthy hiatus US stock exchanges locked in hefty gains Tuesday, with the S&P 500 Index surging over 2%. Gains were led by financial stocks on reports the Federal Reserve could keep the current federal funds rate steady until the end of the year. Asian markets have been bullish this morning partly because of a pullback in global energy prices. Commodity markets saw sharp losses, with crude futures declining below USD 140 a barrel on fears global demand will falter and an easing of geopolitical tensions over Iran. According to our estimates, Wednesday's morning news flow is upbeat for Russian investors. Potential gainers at the open could be bank issuers, as they could reap handsome gains on the Fed's interest rate expectations. Stocks of resource-based companies will likely come under pressure from the recent correction on commodity markets. Be that as it may, we do not expect these names to fall sharply against the backdrop of bullishness on international bourses. Trading in utility stocks, as we see it, will remain volatile amid abundant supply on the part of former UES shareholders.

Daily Review. 8th July, 2008

Russian stock indices closed out in positive territory Monday, powering ahead on bullishness on European exchanges, with the RTS Index inching up 0.06% and the MICEX Index rising 0.75%. Friday's pullback on commodity markets produced no tangible impact on domestic issuers. Banking stocks unexpectedly led the gainers, although demand for financial assets remains shaky, as Sberbank added on 1.6% and VTB gained 2.5%. After a sharp decline at the end of last week steel issuers largely outperformed, with NLMK leaping 3.3%, MMK rising 0.3% and Severstal advanced 1%. O&G names saw modest demand Monday, with fractional d-o-d fluctuations. As a result, Lukoil inched up 0.3%, Gazprom and Tatneft ended flat, while Rosneft added on a modest 0.2%. Bearish sentiment prevailed on US exchanges Monday on rekindled woes of higher losses in the financial sector due to the liquidity crunch. Key benchmarks gave up around 1% by the final bell and financial plays led the decliners. The bearish trend spilled over to Asian trading floors that kicked off in the red this morning. Commodity markets look steady and global oil prices are largely unchanged since Friday's pullback. We believe that Tuesday's morning external news flow is essentially downbeat for the Russian market. After a recent sell-off in financial names on global bourses, Russian bank issuers will most likely top the underperformers. We also expect trading in utility stocks to stay volatile amid abundant supply on the part of former UES shareholders. Resource-based equity plays will likely remain the least vulnerable to external negativity.

Daily Review. 3rd July, 2008

Russian benchmarks managed to win back some of their losses from the previous session in the absence of major negativity from foreign markets on Wednesday, with the RTS Index edging up 0.57% and the MICEX Index advancing 0.94%. Given instability on international financial markets, even surging crude futures are not capable of acting as a full-fledged upside driver for O&G stories, as Lukoil jumped 1.7%, Gazprom slid 1%, Rosneft inched up 0.6% and Tatneft declined 1.8%. After heading south for several sessions in a row, bank names finally outperformed the market, with Sberbank jumping 1.7% and VTB gaining 2.4%. Metal issuers, except Severstal, also advanced on reports about a possible increase in coking coal supplies to the domestic market, with MMK climbing 2.5%, NLMK adding on 0.8% and Norilsk Nickel settling 1% higher. Wednesday's lead advancers were genco stocks on a rapid rise of investor interest in the sector, with Mosenergo soaring 9% and OGK-5 climbing 5.5%. U.S. indices finished Wednesday in the red, shedding 1.5% to 2.5%. A weaker dollar and a relentless rise in crude futures continue to keep American stocks under pressure. Yesterday's heaviest casualty was auto giant General Motors, whose shares sank a painful 15%, while the market cap of the world's former biggest auto maker declined to USD 5.5 bn. Asian markets are also bearish this morning. Commodity exchanges turned in mixed performances Wednesday, with metal prices largely down, while oil contracts, on the contrary, powered ahead, approaching the USD 145 mark. Thursday's external news flow is again downbeat for Russian investors due to a continuing sell-off on global trading floors. We expect stocks to move downhill across the board in early trading. Soaring crude futures could lend some support to O&G plays. The Bank of England and the ECB are to announce their rate decisions at 3 pm and 3:45 pm Moscow time. Market participants expect the ECB to lift its benchmark interest rate by 0.25%. Although this decision has for the most part been priced into the current stock valuations, we believe the market would react negatively to a rate hike (if any) on both European and American exchanges.

Daily Review. 2nd July, 2008

After kicking off quite smoothly on Tuesday, the Russian stock market experienced a massive sell-off amid weakness on European exchanges and fears about a further slowdown in the global economy. As a result, benchmark RTS gave up 2.63% and the MICEX Index tumbled 3.45%. Yesterday's top decliners were O&G plays despite record prices on global markets, with Lukoil sinking 3.6%, Gazprom shrinking 4.1%, Rosneft pulling back 3.4% and Tatneft plunging 5.1%. Heavy losses also overtook the metal sector, as Norilsk Nickel shed 3.9%, MMK declined 3.5%, NLMK fell 3% and Severstal ended 3.1% lower. Financial names also traded down in line with the market trend, with Sberbank tumbling 3.8% and VTB sliding 2.6%. The day's standout gainers were AvtoVAZ prefs (up a hefty 14.6%) on expectations of much higher dividend payouts. U.S. stock indices finished Tuesday in positive territory, adding on around 1%, in highly volatile trading throughout the session. Financial names led the gainers after several days of a non-stop decline. Asian exchanges, however, are looking largely bearish this morning. Sluggish demand for U.S. export products and rising inflationary pressure add no optimism to investors. Crude contracts bounced back to record highs after IEA officials said there is a risk global supply could be insufficient to meet rapidly growing demand in the next few years. Wednesday morning's news flow, in our view, is largely bullish for the Russian market and key stock indices could recoup some losses incurred yesterday in early trading. Fundamentally, O&G stories still hold the strongest positions. Demand could pick up for metal issuers, first and foremost MMK, on reports coking coal supplies to the domestic market could rise. Also, banking equities could lock in gains on the heels of surging demand for stocks of international financial groups.

Daily Review. 1st July, 2008

Russian benchmarks traded firmly in the red Monday despite largely bullish sentiment on European exchanges and record prices on global energy markets. As a result, the RTS Index eased 0.66% and the MICEX Index dipped 0.69%. O&G plays were a mixed bag Monday, although they managed to outperform the market, with Lukoil advancing 0.6%, Gazprom ending flat and Rosneft slipping 0.3%. Steel makers also turned in mixed performances, despite favorable conditions in the sector, as NLMK climbed 3.8%, MMK tumbled 1.3% and Severstal declined 1.5%. Norilsk Nickel was off 2.1% as a reaction to the shareholder meeting's results. Bank names headed further south under pressure from global markets, with Sberbank dwindling 2.2% and VTB losing 1.3%. U.S. indices ended Monday mixed, with the heaviest casualties seen in financial names. The view that a recession is inevitable in the world's biggest economy is gaining ground on financial markets. Asian indices are also mixed this morning, while commodity markets saw a correction Monday, with crude-oil futures, however, still hovering above USD 140 a barrel. In our opinion, Tuesday's external morning news flow is neutral for the Russian market and in the absence of any extremely negative news from abroad we expect today's trading to be fairly low key. Domestic bank stocks will remain under pressure from sell-offs in financial stocks on global exchanges, while resource-based issuers look set to outperform. Gazprom's slightly ambiguous financials are not likely to take a toll on the gas monopoly's market cap. Consumer equities are expected to see more sluggish demand as investors are wary about high-risk assets.

Daily Review. 30th June, 2008

Russian stock indices took a nosedive at the open Friday on the heels of a major pullback on US exchanges the day before. Bullishness on commodity markets, however, coupled with better-than-expected consumer spending in the US propelled domestic indices into the black, with the RTS Index edging up 0.43% and the MICEX Index adding on 0.48%. O&G plays largely outperformed the market, locking in gains after crude futures jumped above USD 140 a barrel, with Lukoil climbing 1.4%, Gazprom adding on 1.2% and Rosneft advancing 3.7%. Metal issuers also posted gains on the favorable market conditions, as Norilsk Nickel spiked 1.6%, NLMK was up 1.4% and Severstal gained 1.1%, while MMK bucked the trend, off 1.4%. As widely expected, bank stocks ended the day as the standout decliners, with Sberbank sliding 1.9% and VTB losing 0.7%. American benchmarks headed further south Friday amid uncertainty surrounding the current status and prospects of the world's biggest economy. As in recent sessions, bank names ended up as the standout decliners. A correction set in on some Asian exchanges today after a sharp pullback last week. Commodity markets look favorable, with oil contracts stable above USD 140 a barrel. Turbulence on financial markets prompted investors to seek out alternative investment vehicles, with commodity markets acting as a safe haven. Based on our estimates, the Monday morning news flow is neutral for the Russian market and we expect trading to kick off at levels near Friday's close. That said, we do not rule out bullish gambits in some specific issuers intraday, most likely O&G plays, whose current stock valuations are unjustifiably low against red hot energy prices. And although domestic lending institutions and the entire banking sector are resilient to global market fluctuations, we anticipate slackening demand for Russian financial stories. Once bullish trends gain momentum, steel-makers could top the list of gainers.

Daily Review. 27th June, 2008

Russian stocks trended up at the open on the Fed's interest rate comments, but weak performances of European exchanges dragged Russian benchmarks down, with the RTS Index easing 0.09% and the MICEX Index slipping 0.39%. Notwithstanding a lower likelihood that the Fed will hike the federal funds rate anytime in the near future, domestic bank stocks drifted south on expectations of further writedowns among US financial groups, with Sberbank losing 0.7% and VTB declining 1.7%. O&G plays saw marginal fluctuations, as Lukoil dipped 0.3%, Rosneft edged up 0.2% and Tatneft rose 0.1%. Gazprom saw over 1% shaved off its market cap. Metal names traded range-bound, with Norilsk Nickel shedding 0.3%, MMK rising 0.7%, NLMK easing 0.9% and Severstal ending 0.8% higher. US exchanges saw massive sell-offs Thursday, with June as the worst month since the Great Depression. As a result, the S&P 500 Index plunged over 3% and only oil plays managed to eke out gains. Downbeat sentiment spilled over to Asian markets, with the region's key indices trading firmly in negative territory. Against the backdrop of a declining dollar and sell-offs in financial stocks, crude futures staged a rally, breaching the USD 140 mark. In our view, the Friday morning news flow can be expected to be sharply downbeat for the Russian market, with a broad-based sell-off likely in early minutes. Resource-based companies could slightly outperform the market on the back of bullishness on commodity markets. Bank stocks could again come under the heaviest pressure, as US consumer spending data, due out today at 4.30 p.m. Moscow time, could point the way towards market trends next week.

Daily Review. 26th June, 2008

Wednesday trading was low key ahead of the FOMC meeting. As a result, the indices finished the session largely unchanged, with the RTS Index inching up 0.08% and the MICEX Index ending 0.14% higher.Quite predictably, bank stocks outperformed the market amid rekindled demand among global investors for financial assets, with Sberbank adding on 2.1% and VTB climbing 1.4%. Against the backdrop of stability on international energy markets O&G plays were range-bound, as Lukoil gave up 1.1%, Gazprom rose 0.7%, Rosneft slipped 0.8% and Tatneft gained 0.5%. Steel stocks are back in vogue, with NLMK spiking 3.5%, MMK edging up 0.8% and Severstal leaping 1.8%. One of the day's downers was Aeroflot (-4.1%) on expectations the air carrier's 2008 net profit could contract.US stock markets were largely bullish on Wednesday. The S&P 500 Index advanced 0.6% by the close. Yesterday the Federal Reserve decided to keep its target for the federal funds rate steady at 2% and given the statement after the FOMC meeting the central bank has no intention to lift the rate, at least, at the next meeting provided that economic activity remains unchanged. FOMC members also noted that consumer spending continues to provide robust support to the economy. Against this backdrop, Asian trading is mainly upbeat this morning. Crude futures slightly contracted after the first build in US oil stockpiles in 6 weeks. According to our estimates, Thursday's morning news flow is upbeat for the Russian market and we expect most blue chips to kick off higher in early trading. The most alluring names today are financial plays on a lesser likelihood of an increase in the US interest rate in the near future. O&G stories could slightly underperform the market on the heels of a correction in crude futures.

Daily Review. 25th June, 2008

Russian indices dipped further south under pressure from bearish performances on global equity markets, with the RTS Index giving up 1.43% and the MICEX Index shedding 2.18%. The day's standout decliners were genco stocks that rallied at the end of last week, a move that was devoid of fundamentals, with Mosenergo plummeting 9.2%, WGC-3 plunging 8.7% and WGC-5 sinking 5.7%. Russian bank stocks were still out of favor, as Sberbank pulled back 2.2% and VTB tumbled 2.5%. Metal issuers traded in synch with the market, with Norilsk Nickel losing 2.9%, NLMK easing 1.7%, MMK falling 1.4% and Severstal declining 2.6%. Bullishness on energy markets failed to keep O&G plays from sliding, as Lukoil was off 1.8%, Gazprom edged down 1.7%, Rosneft shed 1.3% and Tatneft skidded 3.4%.U.S. exchanges saw more red ink after a bigger-than-anticipated drop in consumer confidence. Financial plays, however, outperformed the market for the first time in recent weeks. Asian markets are mixed this morning, while commodity markets look stable, with oil contracts hovering in the range of USD 136-137/bbl. We view Wednesday's morning external news flow as neutral and do not expect heavy volumes at the open. An upswing in financial stocks on international trading floors could lend support to Russian banks. In our view, the lingering correction in O&G stories is unjustified and should come to a close. Reports about the possibility of RusAl representatives to take part in negotiations with Norilsk Nickel and Metalloinvest over the establishment of a metal holding could spark a short-term rally in Norilsk Nickel's stock valuations. Nonetheless, overall conditions on the non-ferrous metal market remain unclear.

Daily Review. 24th June, 2008

The Russian equity market was largely bearish Monday due to a downslide on global exchanges at the end of last week. As a result, the RTS Index shed 1.78% and the MICEX Index gave up 1.54%. Continuing upside on commodity markets failed to lend much support to domestic issuers. A sharp fall in O&G plays amid improving energy markets looked unjustified, with Lukoil losing 2.7%, Gazprom dropping 0.7% and Rosneft ending 2.9% in the red. Steelmakers were also in retreat after several days of a non-stop rally, with Severstal easing 1.4% and NLMK giving up 3.3%. Only MMK bucked the trend, up 0.2%. Norilsk Nickel (-2.1%) remained under pressure from negativity on the sales market of its main products and also uncertainty surrounding the metal giant's future corporate development. Intraday bank stocks exhibited strong resilience to external negativity as Sberbank dipped 1.2%, VTB inched up 0.2% and Bank Vozrozhdenie added on 1.8%. American stock exchanges experienced a sell-off in financial names Monday. However, the benchmarks saw only marginal fluctuations amid an upswing in base commodities. Asian markets, in turn, headed south for the fourth session in a row on expectations that exporters would report softer earnings. Commodity markets encountered a slight correction on a rising greenback. The threat of terrorist attacks in Nigeria, however, continues to keep crude futures near all-time record highs. We expect the Tuesday morning news flow to be largely neutral for the Russian market. A sell-off in financial names on global exchanges will likely put pressure on domestic banking names, although the national financial sector looks stable. After an unjustified downturn Monday O&G stories look poised to outperform the market today, while metal producers that lack their own resource bases could underperform the sector. Also, we believe slackening demand for non-ferrous metal stories is quite likely.

Daily Review. 23rd June, 2008

Russian stock indices drifted lower Friday under external negativity, shrugging off still high prices on global commodity exchanges. As a result, benchmark RTS pulled back 0.67% and the MICEX Index gave up 1.04%. Quite unexpectedly, gencos emerged as the day's standout gainers, adding on 3% to 8% without any apparent reasons. Meanwhile, this upswing could be short-lived and conditions could change in the coming days when UES shareholders gain stocks in unbundled concerns. Losses were led by financial plays because of deteriorating conditions on external markers, with Sberbank and VTB off 1.5%. Oil plays also underperformed the market on declining crude futures, with Lukoil losing 1.1%, Gazprom dropping 1.2%, Rosneft off 1.4% and Tatneft shedding 1.4%. Steel-making stocks again outperformed the market, as Severstal inched up 0.2%, NLMK fell 0.2% and MMK eased 0.1%. US trading was in the grip of bearish sentiment Friday, with the key indices ending the day an average 2% down. Financial and automotive securities led the decliners. This morning Asian names are also heading south on expectations of further cash writedowns in the banking sector and rallying oil prices. Commodity markets are on the move, with oil contracts hovering around USD 136 a barrel and base metal prices also on the rise. In view of the above factors, Monday's morning news flow should be largely downbeat for the Russian market and we expect stock indices to kick off in the red. Bullishness on commodity exchanges is capable, however, of capping a slide in Russian securities. Financial stories could underperform the market for the better part of the session. That said, we believe downside in oil and metal names will be minimal.

Daily Review. 20th June, 2008

Trading in Russian equities was low key on Thursday. Given a conflicting news flow domestic benchmarks experienced minor fluctuations, with the RTS Index inching down 0.08% and the MICEX Index slipping 0.14%. O&G plays largely underperformed the market, although global crude prices remained red hot. As a result, Lukoil dipped 1.3%, Gazprom edged down 0.2%, Rosneft gave up 0.7% and Tatneft ended 0.8% higher. Steel makers continued to reap gains on a weaker chance of export duties to be introduced, with Severstal gaining 2.3%, MMK spiking 3.2% and NLMK surging 2.1%. Yesterday Norilsk Nickel added 0.3% to its market cap. Domestic bank names turned in a mixed performance, with Sberbank losing 0.5% and VTB adding on 0.7%. U.S. trading floors were mainly bullish Thursday, with indices recouping a half-percentage drop at the open and finishing the session in positive territory. Conversely, Asian exchanges, turned bearish after China decided to hike fuel prices for the first time in nearly 8 months. Crude-oil futures gave up over 3% Thursday on expectations that higher China’s fuel prices will curb potential demand. This morning we expect the market to kick off on a neutral note and volumes to be thin throughout the session. O&G names could underperform the market on retreating oil prices. Banking stocks are most likely to see lackluster demand. Also, we would like to point to an increasing likelihood of a correction in steel stocks.

Daily Review. 19th June, 2008

Russian stock indices turned in mixed performances Wednesday while bucking unfavorable trends on international capital markets. As a result, the RTS Index inched up 0.15% and the MICEX Index eased 0.30%. Wednesday’s lead advancers were steel-makers on waning expectations that export duties will be imposed on metal products and prevailing favorable conditions in the sector, with NLMK gaining a hefty 3.9%, Severstal climbing 3.6% and MMK ending 1.6% higher. Norilsk Nickel (-0.6%) saw more red ink amid lingering uncertainty about the company’s future development strategy. O&G plays lacked stamina on stalling oil prices as Lukoil shed 0.5%, Gazprom edged up 0.1%, Tatneft tumbled 0.5% and Rosneft fell 0.3%. Russian bank stocks drifted lower under the influence of external negativity, with Sberbank losing 0.5% and VTB pulling back 1.8%. U.S. benchmarks dipped Wednesday on expectations the manufacturing sector would slow down, slipping over 1%. The list of decliners was led by automakers. The bearish sentiment spilled over into Asian trading floors, with the region’s key indices trading deep in negative territory this morning. On the other hand, commodity markets look stable and oil futures gained over 2% on a strike threat in Nigeria, a declining dollar and a drawdown in US crude stockpiles. Thursday’s morning external news flow, however, does not look upbeat for Russian investors. We expect most liquid names to kick off to the downside at the open. After a breather oil and gas stories could outperform the market. Bank names will likely remain the most exposed to external negativity. Nor do we do not rule out corrective trends in metal issuers after several sessions of unbroken upside. Nevertheless, the slimmer chance of export duties being imposed will continue to lend considerable support to this sector.

Daily Review. 18th June, 2008

Although global equity indexes were largely bearish Tuesday, Russian benchmarks moved higher, with the RTS Index gaining 1.39% and the MICEX Index adding on 1.34%. Favorable conditions on commodity exchanges continue to lend key support to the domestic stock market. As we predicted, bank names led the gainers, moving to the upside on spurts of demand for financial plays on global bourses as Sberbank climbed 2.7% and VTB leapt 2.3%. Moderate advances were also seen by oil and gas plays despite signs of a correction in crude futures, with Lukoil inching up 0.2%, Gazprom jumping 1.5%, Rosneft rising 1.4% and Tatneft ending 0.7% higher. Steel makers locked in gains on the heels of favorable prices in the sector as NLMK soared 3.9%, Severstal edged up 1.5% and MMK finished 0.8% in the black. Bearish sentiment prevailed in US trading Tuesday after the release of worse-than-expected PPI data for May and renewed worries about more writedowns in the banking sector. By an average, U.S. exchanges finished the day 0.7-0.8% lower. Meanwhile, Asian markets are faring better, with key indices trading in positive territory on surging metal prices on the global market. Oil contracts are on a moderately southbound track on expectations a global economic slowdown could dent demand. We view Wednesday's morning external news flow to be largely downbeat. Metal issuers, however, could outperform the market on the back of favorable price trends, whereas oil plays could continue to see lackluster demand, although we do not expect O&G stocks to fall sharply. After Tuesday's rally, the list of gainers could feature bank stocks, as fears resumed that the state of the US financial sector will deteriorate.

Daily Review. 17th June, 2008

Although European bourses were largely in a bearish mood Monday, Russian benchmarks moved to the upside, with the RTS Index gaining 0.41% and the MICEX Index advancing 0.29%. Red hot energy prices on the global market continue to lend key support to the domestic equity market. Russian banks outperformed the market on rekindled local demand for financial stocks: Sberbank jumped 0.5% and VTB leapt 0.7%. Norilsk Nickel (+0.9%) also headed north on expectations that Australian nickel supplies will drop. Steelmakers were a mixed bag as MMK notched down 0.2%, NLMK added on 0.6% and Severstal ended flat. O&G plays, notwithstanding an intraday uptick in crude futures, suffered slackening demand. As a result, Lukoil pulled back 0.8%, Rosneft inched up 0.1%, Tatneft gave up 1.1% and Gazprom jumped 0.9%. After Monday's nosedive in early minutes U.S. stock indices turned in a positive performance for the rest of the day, erasing the earlier losses. Financial plays outperformed the market for the second session in a row. Asian trading floors are largely mixed this morning. Commodity markets still look stable. After a speculative spike just shy of USD 140 a barrel in the middle of Monday's session crude-oil futures retreated to USD 135. We view Tuesday's morning external news flow as largely upbeat. Oil and gas plays could come under pressure from a pullback in global oil prices. Given the lack of major news in the sector, metal stories will likely remain on the sidelines, while domestic banking names could lead the gainers for the second session in a row. Important data from the US housing market and May PPI data are due out at 4:30 p.m. Moscow time today, which could cause the market trend to shift.

Daily Review. 16th June, 2008

Russian stocks powered ahead amid bullishness on commodity markets and ahead of the long holidays. By the close, the RTS Index gained 0.74% and the MICEX Index advanced 0.85%. After a short breather O&G stocks outperformed the market: Lukoil spiked 2.3%, Gazprom added on 2.5%, Rosneft jumped 1.1% and Tatneft edged up 0.5%. Hefty gains were posted by steel makers: NLMK jumped 2.4%, MMK was up 1.3% and Severstal improved 0.6%. Norilsk Nickel headed further south after the release of weaker-than-expected financials, off 1.3%. Bank stocks again suffered slackening demand notwithstanding a spurt in international financial groups: Sberbank lost 0.5% and VTB inched up 0.1%. At the end of last week, American exchanges experienced high volatility, but bullishness in the last trading session offset a pullback the day earlier. Asian markets are up this morning, posting gains on a strengthening dollar, and commodity markets look mostly stable. Metal prices were up slightly and of note is a sharp leap in nickel prices on the back of fears metal supplies from Australia could decline. Oil contracts continued to hover around USD 135 a barrel. According to our estimates, today’s morning news flow is moderately upbeat for the Russian market. The strongest demand could be seen in metal issuers on the heels of surging metal prices on the international market. Financial names could also outperform the market, while O&G plays will likely remain on the sidelines, and we expect domestic stocks to kick off near Wednesday’s close. Polymetal can be expected to see big speculative demand today on reports that 69% of the metal producer was sold at a 14% premium to the market.

Daily Review. 11th June, 2008

Bearish sentiment prevailed in Russian trading Tuesday amid weak performances by European benchmarks and a retreat on commodity markets. By the final bell, the RTS Index inched down 0.78% and the MICEX Index gave up 0.91%. O&G plays largely drifted lower on the heels of retreating crude futures: Gazprom was off 1.3%, Rosneft tumbled 1.3% and Tatneft inched down 0.2% Only Lukoil bucked the trend, up 0.4%. Weaker-than-expected financials released by Norilsk Nickel (-1%) put some pressure on metal issuers: NLMK shed 0.9%, Severstal dipped 1.2% and MMK eased 0.1%. Domestic bank stocks posted losses on slackening investor demand, with Sberbank down 0.4% and VTB plunging 2.6%. On Tuesday U.S. stock indices saw modest losses amid a higher-than-expected increase in the country’s trade deficit in April. Financial plays outperformed the market for the first time in many sessions. Despite rising inflationary pressure in Asia, the region’s benchmarks are mixed this morning. A bearish trend prevailed on commodity markets Tuesday on a stronger dollar and the International Energy Agency’s downward revision of its oil demand outlook. This morning’s news flow is again not likely to please Russian investors. A pullback in crude futures could put a damper on domestic O&G plays. Metal issuers also risk being sidelined, while Russian bank stocks, on the contrary, stand a good chance today to outperform the market on the heels of an upswing in financial stocks on global exchanges.

Daily Review. 10th June, 2008

Russian stock indices kicked off to the upside Monday on the heels of recovering commodity markets and a predominantly bullish opening in the United States. By the end of the day, the RTS Index edged up 0.64% and the MICEX Index gained 0.85%. Yesterday's standout gainers were telecoms on expectations of structural changes in the sector, with Uralsvyazinform spiking a hefty 6.1% and Siberia Telecom leaping 4.9%. O&G plays locked in handsome gains on the back of the favorable environment on global energy markets as Lukoil jumped 1.1%, Gazprom advanced 0.9%, Rosneft inched up 0.3% and Tatneft ended 0.7% higher. Metal issuers largely outperformed the market as Norilsk Nickel was up 0.5%, MMK added on 1.1%, NLMK climbed 2.3% and Severstal ended 1% in the black. Notwithstanding external negativity, Russian banks added some to their market caps: Sberbank grew 0.7% and VTB gained 1.2%. US benchmarks were a mixed bag Monday after a sharp pullback at the end of last week. The S&P 500 Index saw fractional upside, moving up 0.1%. The day's lead decliners were again financial stocks on statements by Fed Chairman Ben Bernanke that steps are needed to prevent inflation from picking up momentum. Asian markets are down this morning on expectations financial companies will report further write-downs and borrowed resources will become more expensive. A stronger dollar caused a modest decline on commodity markets. Tuesday's morning news flow does not add any optimism to domestic investors. Bank shares will be under the heaviest pressure, as lending rates could go up both domestically and internationally. Notwithstanding a retreat, crude futures are hovering around their highs, providing support to Russian O&G plays. And last but not least, robust demand for telecoms is likely to continue on renewed expectations about speedy privatization of Svyazinvest.

Daily Review. 7th June, 2008

Friday trading kicked off with an uptick on upbeat performances by global equity markets and soaring crude oil prices. Be that as it may, a 5.5% jump in the US jobless rate reversed the trend and only upside on commodity markets kept Russian stock indices from dropping: the RTS Index gained 1.11% and the MICEX Index added on 0.51%. The day's top advancers were oil and gas plays on surging oil futures: Rosneft spiked 3.1%, Lukoil was up 1.5%, Gazprom jumped 1.3% and Tatneft rose 2.5%. Metal issuers were a mixed bag: Norilsk Nickel was off 0.9%, MMK inched up 0.6%, NLMK grew 1% and Severstal slipped 0.6%. Given slackening demand, domestic banking stocks underperformed the market: Sberbank slid 1.5% and VTB sagged 3.3%. An adverse impact on the sector came from news that VTB posted heavy losses under securities transactions in 1Q 2008. Yesterday marked the end of UES' trading history (down 1%), with the last deal transacted at USD 1.068 on MICEX. American stock indices plunged Friday on a record jump in the unemployment rate, which signals that a recession in the world's biggest economy is still very likely. The S&P 500 tumbled more than 3%, with financial plays leading the list of losers. Commodity markets turned in upbeat performances Friday, as crude contracts gained a hefty USD 8 within a session, approaching USD 140 a barrel on expectations the greenback will weaken and demand on the part of developing countries is set to expand.Saturday's morning news flow is downbeat for the Russian market and we project most liquid names to open in the red. Be that as it may, all-time high oil prices could lend support to O&G plays and the entire market as a whole. Again, bank names will be the most vulnerable to external negativity today.

Daily Review. 6th June, 2008

Thursday's move to the downside at the open was offset in the afternoon on the back of robust employment data out of the US and rallying demand on commodity markets. As a result, the RTS index dipped 0.07% while MICEX closed fractionally higher (+0.01%). A number of metal stocks outperformed the market on Thursday, including Severstal (-0.7%), Norilsk Nickel (+0.3%) and NLMK (+0.9%). Meanwhile, oils were a mixed bag on stabilizing crude oil prices, with Lukoil dipping 0.4%, Gazprom shed 0.5%, Rosneft edged up 0.1% and Tatneft advanced 1.8%). It was another sluggish day for banking stocks, with Sberbank giving up 0.4% and BTV falling 0.5%. UES was flattish, easing 0.1%. US equity markets locked in gains yesterday on stronger employment data, with the key benchmarks moving up slightly less than 2%. The overall upbeat mood spilled over to Asian trading platforms, where commodity plays are going strong this morning. Crude oil futures posted their biggest 1-day gains in the history of NYMEX trading, retracing to around USD 128. One of the factors driving this massive move to the upside was a weakening dollar against the backdrop of a potential interest rate hike in the Eurozone as early as July. We view today's news flow as conducive to buying on the domestic market, and we expect to see upside across the board. Needless to say, yesterday's 4% surge in oil futures makes oils the top pick today. It's also noteworthy that today is the last day for trading in UES shares and the last chance for investors to take part in the power industry reform process.

Daily Review. 5th June, 2008

The Russian stock market experienced an inevitable downswing Wednesday as the RTS Index sank 3.13% and the MICEX Index plunged 3.07%. The downturn stemmed from a continuing decline in global oil prices and weak performances on European bourses. The day's standout losers, despite impressive gains in Lukoil's 1Q financials, were oil and gas plays: Lukoil tumbled 5.3%, Rosneft gave up 4%, Gazprom dove 3.3% and Tatneft was off 4%. Investors' wary attitude towards financial assets translated into weak demand for domestic banking stocks: Sberbank pulled back 1.7% and VTB declined 2.3%. Stabilizing metal prices kept metal stocks from sliding: Norilsk Nickel dropped 2.6%, Severstal declined 1%, NLMK eased 1.6% and MMK shed 1.3%. UES (+1.3%) rode high despite the overall negativity. By Wednesday's close US stock indices turned in a mixed performance amid high volatility. Uncertainty about the real state of affairs in the financial sector continued to put pressure on American bank stocks, while tech issuers were top picks. Asian markets have trended down for the second session in a row on fears demand for export products could weaken. Global crude futures are heading south amid the strengthening dollar and new expectations about oil product consumption growth. At present, oil contracts are trading more than 10% off their all-time highs. Thursday's morning news flow will not be encouraging for investors. O&G plays could extend losses at the open, while stabilization in global metal prices could prop up metals. Of note is the refusal by Polyus Gold's management to accept Mikhail Prokhorov's offer to buy a 6.5% interest, which will likely spark a decline in the gold miner's stock prices. Lingering uncertainty on global lending markets and expected anti-inflationary measures domestically do nothing to sharpen the appeal of Russian bank stocks.