Russia's RTS Index futures - liquid tradable instrument.

This is a discussion on Russia's RTS Index futures - liquid tradable instrument. within the Indices forums, part of the Markets category; Good morning - very brief today. 2 big things – in my opinion - have all the potential to lend ...

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Old Jun 17, 2010, 8:45am   #11
 
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Morning Comment - 17.06.2010. RASPADSKLAYA UPGRADE

china white started this thread Good morning - very brief today. 2 big things – in my opinion - have all the potential to lend a shoulder to market confidence and act as a catalyst to liquidity waiting to be put in action:

1) Tories showed that Gov’t can and will live up to its pre-election promise essentially eliminating loose Labour-invented “tripartite” system in financial regulations and being tough on Gov’t involvement in finance.

2) BP - well some will say having no other choice – showed that they can and will fire every ammo they have to deal with the financial aspect of the disaster. Even more importantly, BP’s divs seem to be roughly enough to pay off a significant part of the fund (7 mil quid vs. 13).


There will be casualties down the road, mostly pension funds in part living off those divs. As a side effect, there may be less involvement by those funds in Emerging Markets. However, on the grand scale of events these two are MEGA supporting stories – in my opinion.

RUSSIA: Mixed opening is expected in Russia and looks like the market will take a breath till macro data release in US; current crude oil levels support our oil & gas majors, other commodities are stable as well. Yesterday after positive opening we saw profit taking in liquid names since the very start of the session, though shares of Lukoil, Sberbank and RTKM/p were strong all day long. In small caps trading activity was not outstanding: we had sellers in utilities (HYDR, KZBE, OGK2, OGK6), buyers in some territorial generating companies. We continue to see ongoing rotation in several international small caps dedicated accounts: have sellers in quite illiquid stuff like CHLB, ANGS, SGAT, VHIM.

Yesterday our research team revised targets for Raspadskaya taking into account recent explosions at Raspadskaya coal mine which is the core asset of the company. Also we upgraded our coking coal prices forecast. As a result, we increased our fair price by 38% from $5.5 to $7.6 per share with upside potential of 80%. We recommend BUY the stock which is a long-term investment story. Pls see research note attached, I will also be commenting on this latest research in a separate note.
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Old Jun 18, 2010, 8:30am   #12
 
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Morning Comment - 18.06.2010.

china white started this thread Good morning – and just a very quick observation here really. Again – macro was by far less than spectacular yesterday; esp. jobs that showed the pace of a recovery might be modest. However – last minutes of trading – and guess what? Liquidity flexed its muscle. What is most interesting in my opinion is that it was consumer goods, energy, materials and technology stocks that turned higher. Demand is there and money is there.

RUSSIA: all day yesterday locals were shipping equities in whilst western accounts were on the other side of the fence. Almost all DR-s were trading at a discount to their local counterparts on MICEX. In blue chips we churned quite a bit in SIBN where we were preferred sellers and SNGSP where we were buyers. All day yesterday activity was moderate; however in the late going we saw a massive surge in liquidity with most issued well supported into the close.

Sector play: TNBP still bid up in a new price range, in BANE – sellers prevailing. Good demand for RASP, the rest of the sector was under pressure, shopping spree in most names in telecoms with virtually no supply. Activity in energos on the up, buyers in most names, however selling interest in MRK and selected OGKs should be noted.

Good trading on Friday to you!
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Old Jun 21, 2010, 8:55am   #13
 
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Morning Comment - 21.06.2010.

china white started this thread Good morning,

It is amazing now much attention in the British press Tony Hayward attracted after he took a day off Saturday to compete in a glitzy boat race around the Isle of Wight, and even more so, after he wimped out around the deadly submarine wall. Much less attention was paid to a couple of other things.


1. I can’t even blame the guy really for letting his hair down a bit. It is down to David Cameron and his men now – their “to do pronto” list just got bigger – and nastier. Set against the eurozone debt crisis, the City has been on edge for months now about the unhealthy state of the British public purse. With government borrowing at levels not seen since the WWII, Britain’s public deficit had rocketed to a record-high of 156 billion quid in the fiscal year that ended in March; worst thing being that tax pocket has been hit hard by recession. And now BP. For the time being BP seems to have bought itself some breathing space, first important thing for the week ahead is whether BP will be able to raise $ 10 bil from a bond sale – if they do they have the 20 bil they are needing for the escrow fund. However, the Tories undoubtedly realise that they will need to put some money aside to – somewhere down the road - help BP or bail them out – whichever wording you prefer .

The Tories will probably try to use the same medicine for all the nasty germs they have on their plate – austerity measures. 2nd thing to watch this week is Osborne’s emergency budget to be unveiled at 11:30 GMT tomorrow, Tuesday. We’ll see if he Tories are tough enough to quell down concerns about UK as a whole – those concerns are far more unnerving than all PIGS worries together. It is the fall of the UK that REALLY scares the market.

2. In a curious twist, thing to watch real close in this situation is TNK-BP. BP clearly stated that “there is no question of BP selling out of its Russian joint venture with TNK, as that operation accounts for 25% of its worldwide resources and around 10% of profits”. This is BP’s bacon, and things go sour there, that’ll be the worst precursor that BP – and Tories’ sterling effort to save it – comes a cropper.


3. Perhaps most importantly – there is a massive paradigm shift that is happening as a result of BP’s tragedy. The Americans are quite used to rattling their weapons threatening to reduce US dependence on foreign imports by increasing domestic oil production. They have been using that rattling as a fantastic bargaining point with world’s oil exporting nations for quite some time now. Now - that strategy is at serious risk with little prospect of opening other areas around the US to offshore drilling. That bargaining advantage is GONE for any foreseeable future – and this is WHAT REALLY PISSES AMERICANS OFF in regard to BP’s spew.

ANY OIL-EXPORTING EM COUNTRY NOW HAS A CHANCE FOR GLORIOUS TIMES . Where international money will end up flowing (Brasil, Russia, Middle East etc…..) will depend massively on tax regimes in respective oil-producing countries. We will be coming out with our Strategy for Russia’ Oil&Gas sector shortly – and will dwell upon this and other issues in much more detail. STAY TUNED!


4. Finally - from trading perspective - we will be watching how liquidity which is ABOUND in the market, ends up reacting to news from China. There is ALL the potential in the markets to confirm that it double-bottomed, and if the confidence is further strengthened from the UK this week, a massive rally is on the cards.

RUSSIA re-coup for Friday: all day market traded sideways with SBER, HYDR and RTKM/p shining brighter than other blue chips. Energos were well bid, most notably HYDR and IRAO. Distribution grids were under pressure pretty much across the board. Good bids in the late going in Surgut c/p, MTS, Severstal, GMKN and FSK.

Good trading week to you!
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Old Jun 22, 2010, 8:42am   #14
 
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Re: Russia's RTS Index futures - liquid tradable instrument.

china white started this thread Good morning!

Remember the book ‘China Shakes the World’ by James Kynge? We can hardly say that yesterday news from China shook the world looking at markets’ performance in US. Technically indices do not look good and we should get additional very strong trigger to keep on climbing. Clearly, we had a very disappointing end to trading session in the US yesterday. However, let us not forget that the S&P 500 has just completed its biggest two-week rally since November! A technical chartist would point out here that we are stuck to 200 day moving average which – at this juncture – is tacked to 1110-ish confirmation “neck” for the recent double-bottom. Some “yo-yo” style trading round this level may well be in order. There is much liquidity round, as we have been pointing out for some time now, and that liquidity keeps on providing the hard floor that selling attempts bounce off.

Yesterday morning Russian and European bourses took a nice start following Asian markets and rallying metals. Market however decided that news from China can not provide that trigger at the moment that will push the markets higher. Activity in blue chips sector yesterday was good and we saw both domestic & international accounts fixing profit at market since the very opening scaling up. Steel sector was well bid all day long – nice demand was seen in SVST, MMK, NLMK; in utilities sector activity was lower than average, though we continue to see strong bids in TGKs; sellers in OGKD, OGKF; in telecoms we still have strong interest in most stocks especially in URSI & ENCO; in Rostelecom (RTKM & RTKMp) we see very strong flows ahead of AGM.

1. We have upgraded target price for OGK4 (OGKD) to $ 0.118/per share, which implies 44% upside to the current market quotes and reiterate our BUY recommendation for the stock. OGK-4 is our top-pick in the wholesale thermal generation sector. We consider the financial results of OGK-4 as positive. The EBITDA is 24% higher than our expectation. We have revised our financial model, taking into account the reported results and introducing a WACC of 11.84%.

2. Tatneft (TATN) reports 1Q10 US GAAP results. NEUTRAL

3. Ashinskiy MZ (AMEZ) plans to increase steel output by 29% in 2010. POSITIVE Rolled products output growth should amount 12% in 2010. Ashinskiy Metal Works (AMZ) in 2010 plans to increase its steel output by 29% y-o-y to 800 Kt. The company also intends to expand rolled products output by 12% y-o-y to 600.5 t. According to AMZ, the growth of output should be reach due to increase in carbon and stainless sheet production. The new electric furnace should boost production growth. We regard this news as positive for AMZ. We note that the company’s plans top our expectations. The launch of 1 mn tons capacity electric furnace in July, 2010 is expected to boost the plant’s production. We maintain our positive view on AMZ’s stocks. We recommend BUY its shares with the fair price of $0.579.

4. Osbourne’s emergency budget to be unveiled today will or will not give the market that extra bit of confidence that it needs.


GOOD TRADING TO YOU TODAY!
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Old Jun 23, 2010, 8:34am   #15
 
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Morning Comment - 23.06.2010.

china white started this thread Good morning!

We mentioned before that the Americans are quite used to rattling their weapons threatening to reduce US dependence on foreign imports by increasing domestic oil production. They have been using that rattling as a fantastic bargaining point with world’s oil exporting nations for quite some time now. Now - that strategy is at serious risk with little prospect of opening other areas around the US to offshore drilling.

Yesterday it was little surprise to us when the White House said it would fight a court ruling that lifted its ban on offshore oil drilling. That bargaining advantage is GONE for any foreseeable future – and this is a really important paradigm shift in regard to BP’s spew. Of course things may look gloomy – esp. given yesterday’s close, with Oil sector tanking generally and certain related companies (Halliburton, Baker Hughes) getting completely mauled – however, as we mentioned in our previous comments – going forward this shift will massively benefit SELECTED oil-exporting Emerging Markets. Whether Russia will be that SELECTED – will hugely depend on tax brackets. We will discuss this in more detail in our Strategy note due in a week or so.

On other fronts – 2 important things: 1) Tories in my opinion delivered, managing to walk between a hammer and a hard place, by showing the City they are tough enough to “fix” the UK but NOT overly austere to drive money out of the City; and 2) Demand for chips and hi-tech products is firmly there and growing - as Apple’s story would attest to – and you do not choke up your last twopny bit to buy that sector! This, given liquidity in the market, makes me think that any bear moves that may happen into the summer, will present a compelling buying opportunity.

RUSSIA: Yesterday we had good activity in blue chips since the very opening (in GAZP, LKOH, SBER, HYDR, IRAO, CHMF, RTKMp), after lunch the market was very calm till US housing data and we had sellers till the closing bell. In telecoms we kept on buying RTOs: traded good chunks in ESMO, ENCO, URSI - looking to buy more, others are welcome except URSI, ESPK, KUBN; continue to have good trading activity in metals sector - steel names are still in demand (CHMF, MMK), also traded VSMO. In later going we traded Gazprom DRs in size. In small caps investors tend to wait for a turnaround in liquid sector - therefore activity was quite small.

Good trading to you!
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Old Jun 24, 2010, 8:49am   #16
 
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Morning Comment - 24.06.2010.

china white started this thread Good morning! If you believe the worst housing data since record keeping started in the 60-ies is really nasty, you should be wondering why US indices stayed flat into the close. Personally I think market is starting to be deaf to a barrage of negativity in the newsreel. Hardly a bearish sign. Russia will open in green zone this morning following Asian bourses’ direction, but we expect the market today to trade sideways. We are now getting ourselves into a traditional ‘summer trading’ period, when many asset managers are on vacation, therefore activity is subdued, volatility stepped back a bit, though liquidity on MICEX is good, SBER, LKOH GAZP are more or less stable (with SBER outperforming others on each up-tick); ROSN being the laggard.

Yesterday, apart from mid-level activity in blue chips, we churned volumes in RTKM/p ahead of AGM (there is a lot of speculation that dividend pay-out ratio on preferred shares is supposed to be increased 3+ x times). Telecoms continue to be really hot and heavily traded – still have interests to buy ESMO, ENCO, URSI; in utilities sector – buyers in TGKs / sellers in OGKs / sellers in distribution companies.

1. Pharmacy Chain 36.6 (APTK) reports 4Q09 & FY09 IFRS results. POSITIVE 4Q09 bottom line turned to green on one-off $19 mn gain. 4Q09 LFL sales declined by 21% (in ruble terms) on only 6% growth of the average ticket (in ruble terms) and 25% traffic outflow. 4Q09 gross margin stood at 33.3% vs. 30.6% in 4Q08 and translated into positive EBITDA margin of retail segment. The company 4Q09 net income turned to positive $16 mn, supported by the one-off gain of almost $19 mn on restructuring of arrangement with consortium of investors. For FY09 consolidated net loss stood at $11.3 mn. As of end-2009 the company total debt came at about $252 mn (about 40% is ST, 63% is nominated in USD terms), which implies 2009 Debt/EBITDA of 5.6. Pharmacy Chain 36.6 consolidated 100% of JV, which owns a 24.9% stake in Veropharm. The company plans to close additional 70 inefficient stores and open up to 100 new organically. Today the company will hold a conference-call, which we expect will clarify the development plans. Ongoing SPO at RUR93 per share assumes 10% premium to the market. Since 15 June Pharmacy Chain 36.6 has started an open subscription to its 10 mn shares SPO with a placement price set at RUR93 per share (about $3 per share), which implies 10% premium to the current market price. Thus, the company is able to raise $30 mn through SPO. We confirm our BUY recommendation for Veropharm with the end-2010 target price of $47 per share.

2. Holding MRSK (MRKH) expects lower tariff hike dynamics. NEGATIVE Holding MRSK (MRKH) expects the growth rate of RAB-tariffs to be more restrained. Based on the previously announced parameters of RAB-regulation, the growth rate for MRSK in 2011 is expected at 15-40% depending on a region. Thus, the companies transitioning to RAB-regulation from 1 July, 2010 and January 1, 2011 are likely to adopt tariffs which are already adjusted for a 15% growth limit. Lower growth rate is expected in 2011 and in 2012, which in turn will have a significant impact on investment programs of MRSKs. Currently a number of regions favor the postponement of transition to RAB by controlled grid companies from 1 July, 2010 to 1 January, 2011. The Russian government previously stated that it may limit the tariff hike of grid companies to reduce the burden on consumers. In particular, this is envisaged in order to increase the period of RAB-tariff regulation for grid companies. A longer period will allow for smoothing growth rate, as well as to increase the term of returning the funds invested into the construction. The government plans to reduce the growth rate, calculated on the RAB-system for grid companies, including an increase in tariff for FGC, which can make up not 31% in 2011, as previously planned, but 15%. A similar fate awaits the MRKSs. The slowdown of RAB-tariff growth is one of the measures to mitigate the increase in electricity prices on the background of energy market liberalization. In our opinion, the news is negative for quotes of Holding MRSK’s companies, as limiting the tariff hike directly impacts their financials. At least this step may lead to increased debt burden of companies, at most about it would result in changing the parameters of RAB-regulation, in particular the revision of rates of return on invested and new capital and the original base (IRAB). Compensation factor for decreased income during the future periods of regulation, stipulated by the RAB-mechanism, it is difficult to take into account for the moment.

3. MMK (MAGN) mill-5000 works at full capacity. POSITIVE The company plans to produce 100 Kt of heavy plates in June. MMK has launched its mill-5000 at full capacity. According to the company’s plans, in June mill-5000 is expected to increase output of heavy plates by 14% to 100 Kt. We note that heavy plates are used for large diameter pipes production. Successful key project realization. We regard this news as positive for MMK. Mill-5000 was one of the core company’s investment projects. Its successful realization indicates consistent steps undertaken by MMK and effective work of its management. According to MMK forecasts, heave plate consumption in Russia should increase by 30-35% to 5 mn t within the next few years. In 2010 its consumption is estimated at nearly 3.7-3.8 mn t. We recommend a BUY for MMK with a fair price of $1.06 per share.

4. Rosinter (ROST) is ready to start SPO for 4.27 mn shares at a price of $10.5 pr share. NEUTRAL SPO placement price is set at $10.5, which implies a 24% discount to the current market ... On 29 June, Russian restaurant chain Rosinter will launch SPO of 4.27 mn shares (35% of the current share capital) at a price of $10.5 per share (this implies 24% discount to the current market), which is equal to the price of the recent SPO held in February. It is worth mentioning that upcoming SPO is rather a technical placement to enable the company’s major shareholder (Rostislav Ordovsky-Tanaevsky Blanco) to buy back 2.6 mn shares, which he sold during February’s SPO. Thus, in case of successful placement of all 4.27 mn shares, it will raise $45 mn. …and means dilution of the company’s shareholders. The deep discount in SPO placement price to the current market will have a pressure on the company’s stock price in the short run as it means dilution of the shareholders’ EPS. However, SPO is expected to increase the company’s free-float (to up to 46% vs. current 40%) and thus improve stocks liquidity, besides, the raised funds will be spend on the recovery of operating performance, which should positively contribute to investors’ sentiments.

5. MTS and Comstar UTS: pending the decision. NEUTRAL Details of merger to become clearer by this Friday. On 25 June, BoDs of both operators consider current merger of two companies. As noted in the official statement of MTS company may increase the share in alternative operator of the possible use of stocks and cash. Current news we see as NEUTRAL. It should be noted that the previously unknown source of Vedomosti announced that the merger with alternative operator is expected in two stages. First, MTS may announce an offer to purchase from minority Comstar UTS and 10% of the shares, and then can be exchanged shares of Comstar UTS shares in MTS. According to the edition redemption price GDR Comstar-UTS the dissenting minority shareholders could be worth $ 6.5, which is 2.2% below the closing price on June 23. In our view the current conjuncture as well as taking into account existing programs placing of depositary receipts of the two operators of the most attractive seems to sell local shares alternative operator with a simultaneous purchase of depositary receipts. Added that based on our valuation the fair price ADR MTS at the end of 2010 amounts to $ 28 (upside 28%), fair price GDR Comstar-UTS at the end of 2010 of $ 7.7 (upside of 16%).

Good trading to you!
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Old Jun 25, 2010, 8:18am   #17
 
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Morning Comment - 25.06.2010.

china white started this thread Good morning!

Thing to bear in mind today is annual rebalancing of Russell Investments’ indexes, which takes effect after 4 p.m. New York time. Russell itself estimates that $ 4 trillion is benchmarked to its U.S. stock market measures, which include the Russell 1000 Index of the biggest American companies and the Russell 2000 Index of smaller stocks. That re-balancing may well be exaggerating moves in a summer-season market.

RUSSIA: strongest issues yesterday were VTBR and MTSS. Lukoil made a loan to its sub - LUKOIL MID-EAST LIMITED - of up to $5 bn... some shopping spree there from what we are seeing. LUKOil’s standing with Kremlin makes it look internationally for onward moves. Surgut will pay RUB 1.0488/share dividends on Prefs and RUB 0.45/share on ordinary shares, in line with expectations

Good Friday trading to you!
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Old Jun 29, 2010, 8:24am   #18
 
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Morning Comment - 29.06.2010.

china white started this thread Good morning!

“China” seems indeed to be the buzzword for justifying market swings up or, equally so, down! Very short positive affect on the market last week after news of Yuan revaluation was completely disregarded by investors that day, now we have falling Asia on the news of Chinese economic growth concern. Probably a wrong day to expect massive upside in Russia with 35 of 38 energy companies in the S&P 500 tanking yesterday and news of E.On off-loading its stake in Gazprom obviously putting negative pressure on the giant – we mentioned that in our yesterday’s comment.

On the grand scale of events statistics show that FTSE’s All-Share Index’s price-to-earnings ratio tends to gain as the government reins back spending. As we all know, Cameron put his career on the line pledging to cut the deficit to 1.1 percent of GDP by 2015-2016 from 11 percent in 2009-2010. Obviously, investors are quite rightly concerned that slower economic growth may hurt returns; however periods of high government borrowing also tend to be periods when stocks trade on lower-than-normal multiples. Not only UK, but also global stocks should be recovering as government borrowing is reduced, according to that statistics. And with the “intrinsic” liquidity (summer “time” value removed) still firmly in the market, this is likely to kick in once that “summer” time component is back in action by the Fall.

RUSSIA: Yesterday we were mostly active in liquid stocks: buyers in ROSN, GAZP in the early going; sellers in RTKMp right after the opening (after negative news); buyers in telecoms; sellers in utilities (distribution).

Good day to you!
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Old Jun 30, 2010, 8:25am   #19
 
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Morning Comment - 30.06.2010.

china white started this thread Good morning! I would hate the usual barrage of palaver about what the market did yesterday – we all know that. Dismal performance. All about confidence in global recovery. Technically – bearish ‘Head & Shoulders top’ pattern across indices (see attachment – 900-ish target technically speaking) pretty much serving as a billboard on a motorway showing motorists how to get South! Russian equities face to open in the red.

What ahead? 2 very important things in my opinion:

1) On Thursday European banks are set to repay €442bn, money they borrowed at cheap rates a year ago as part of the ECB's attempts to boost liquidity in the market. If this goes smooth, I expect some of the confidence holes to be patched up.

2) On Friday we will be watching Labor Department's monthly employment report as hawks. Companies have indicated that business is getting better, yet there are few signs that they are ready to hire in big numbers. If there is any sign they are – again much confidence will be restored.

My take here is that IF we get SOME confidence boost, “intrinsic” liquidity in the market (seasonal component removed) will quickly fill trading screens with BUY orders. Doubt however this will happen today.

Yesterday we had pretty much activity both in liquid stocks and small caps. After noon we were sellers in SBER, GAZP, LKOH; in small caps sellers were seen across the board (mostly domestic accounts), except telecoms; right before the closing we had aggressive sellers in SNGS, GMKN, SVST, MTS, LKOH from domestic accounts, though strong bids were seen in SNGS, HYDR.

Good day to you!
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Old Jul 5, 2010, 8:16am   #20
 
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Morning Comment - 05.07.2010.

china white started this thread Good morning! A Safa lad who was watching footie next to me in an Ozzie bar off Fulham Broadway past weekend cracked a witty question: “How come Fab stays in his job when Dunga off he goes even though his humiliation on-field was not even remotely close to Fabio’s AND man in charge of “joga bonito” is surely several times cheaper than England’s coach?”

FA’s handy excuse is Fab’s 10 mil quid “transaction cost” as we’d call it, sort of bro you’d pay switching out of LUKOil and into Petrobras for the sake of an example. But that is hardly the reason – just a technical nuisance rather. Main reason for Fab staying and Dunga going is that Fab is (or perceived to be) irreplaceable at the moment, no matter how hard his squad hit the floor, while Dunga’s successors seem be all over the place.

We mentioned that in the aftermath of BP gaffe, US cannot threaten to start its off-shore drilling any more, and this should be a golden age coming for oil-exporting EMs. Where international money will flow though depends largely on what’s brewing in individual oil-exporting EMs, in particular their tax rebates (or lack thereof). What I am getting at here is that Russian Oil&Gas companies may all be dirt cheap by multiples now (Gazprom’s P/E e.g. is still lower than BP’s after all the slaughter house there), BUT if international money perceives them to be easily replaceable by other EM Oil&Gas exporters of Petrobras variety (for tax reasons e.g.), MONEY MAY FLOW AWAY FROM RUSSIA.

Looks like that the Russian market will open in the green following some momentum intraday rebound of Chinese indices and Japan trading higher, also relatively strong commodities. Nevertheless we expect low activity today with US shop shut

Good start to the week to you!
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