The highlights of Tuesday?s equity trading were a 7.3% surge for UES, on expectations of renewed demand for the shares as a privatisation bidding currency, and a sharp 6.8% loss for MTS, whose 3Q results (very sound, in our view) revealed a pent-up profit-taking urge. Looking behind these excitements, we continue to see a well-supported market, with international volumes equalling the healthy domestic liquidity to produce overall turnover over $1 bn, while the benchmark RTS Index gained 0.9%. Perhaps the most significant feature of the day was the late buying in Yukos (+0.6%), as the market shrugged off the Tax Ministry?s reported assessment that the company had underpaid $5 bn of taxes since 1998.
Sibneft (+2.5%) continued to prosper given the continuing possibility of the Yukos deal failing. Another strong performer was Rostelecom (ords +4.4%, prefs +3.9%). Despite unevenness and volatility, the underlying positive trend is clear to see ? and we expect the recovery to continue in the run-up to next Sunday?s promising-looking Duma election.
Russian external debt was stronger yesterday. Spreads resumed their tightening in the absence of important news and against the background of a flat US Treasury market. The EMBI+ Russia Index added 0.5% with its spread tightening by 3 bp to 270. Corporate Eurobond spreads tightened by a solid 10-15 bp. In a separate story, S&P assigned a B+ rating to Gazprombank, Russia's third-largest bank, which is owned by gas monopoly Gazprom. Gazprombank is the most active borrower on the Eurobond market in its sector, having launched three Eurobond issues.
The GKO-OFZ market was mostly flat yesterday, although non-state rouble bonds continued to increase on the back of both the improved liquidity and the rouble's gains yesterday.
