The Russian market had another record setting day on Thursday as the benchmark RTS Index closed up 1.4% above 700. The rally was underpinned by continued solid volumes, with aggregate recorded turnover of $890 mn close to Wednesday?s level. This was the third straight day of the renewed post-election rally. On the first day, the market leader was Surgutneftegaz; the next day it was Yukos; and yesterday, Sberbank took up the charge with a 6.9% gain. There is a nice logic to this. After a few days of uncertainty, the oil price surge triggered more buying first in the politically safe asset play, then, as risk aversion eased, in the major oil stock with a political risk premium, and finally the market?s attention turned to the company which stands to gain most from the favourable economic environment. It is equally logical to see the best performers in the second-tier being regional telecom companies, with Central Telecom rising 6.2% and UralSI 5.2%. At these previously unexplored heights, the market will need constant reassurance externally from continued oil price strength and the continued mix of US economic recovery not threatening early interest rate hikes, and a strong euro. Domestically, support is required from good decisions on key reform issues (tax, gas sector). All these elements remain in place for now.
Russian external debt was mostly flat yesterday, as were US Treasuries and most global emerging debt markets. The EMBI+ Russia Index was flat with its spread tightening by 5 bp to 266. The domestic debt market posted fresh gains on the back of the strong rouble and ample liquidity. The yield on the longest OFZ issue fell to 7.69%.