The Kasyanov government's dismissal made the equity market take a sudden dive yesterday but most of this was recovered and in short order, with little more than one remaining hour of local trading after Putin?s announcement. Volumes were immense ? over $1.1 bn overall, with domestic exchanges reporting the lion?s share ($740 mn). As usual this year, Gazprom locals (-0.8%) saw the most intense activity (63 mn shares), though UES (-2.8%) also recovered its old form with 1 bn shares traded. Apart from LUKoil (+1.2%), the only other leading stocks ending in positive territory (with the benchmark RTS Index down 1.4%) were those with the most attractive fundamental valuations: Rostelecom (+1.8%, with the prefs jumping 10.1%), Vimpelcom (+1.4%) and Sberbank (+1.2%).
The next, and biggest, news for the market is the identity of the new prime minister ? which should be announced by the end of this week. A credible reformist appointment would be especially positive for the state monopoly restructuring stories ? UES, Gazprom and wireline telecoms.
Russian external debt ended the day mostly flat yesterday, easily recovering from the marginal losses posted after the government was dismissed. The EMBI+ Russia Index was unchanged with its spread widening by 2 bp to 258. Domestic debt saw little trading on the first working day of the new week and its reaction to Kasyanov's sacking was similar ? a marginal drop followed by a quick recovery. We do not expect the government's dismissal to change current market trends although volatility may increase in the short-term.