Despite the continued pressure on Yukos (-5.4%) from the shock of the possible de-merger with Sibneft, and with Norilsk Nickel (-4.6%) also feeling some (temporary) heat from the supply shock of the UBS convertible bond issue, the fact that the market remained flat overall yesterday (the benchmark RTS Index edged up 0.2% on the day) points to underlying strength. Apart from the obvious speculative attractions of Sibneft (+5.4%), the politically safe-looking Surgutneftegaz (ords +6.1%, prefs +3.5%) seems a new market favourite. The wireless telecoms maintained their steady strength (MTS +1.2%, Vimpelcom +0.8%), and the day?s other notable winner was Sberbank (+3.6%). Subject to the uncertain timing of more
clarity emerging as regards the Yukos-Sibneft situation, we continue to expect a well supported market in this week?s run-up to the Duma election ?with domestic liquidity in the driver's seat.
Russian Eurobonds continued to slide yesterday in line with US Treasuries. The latter posted losses following the release of strong manufacturing data for November, which raised concerns that the FOMC may increase interest rates. Russian corporate Eurobonds were mixed. The EMBI+ Russia Index lost 0.4% yesterday with its spread tightening by 2 bp to 273.
GKOs, OFZs, corporate and municipal rouble bonds were stronger yesterday as rouble liquidity improved with the start of the new month. Further, domestic debt was supported by the continuing appreciation of the rouble vs. the dollar in the FX market.