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Russian Stock Market. Daily Review. 14th May, 2005

Trading was low-key on Saturday with Western Markets closed for the weekend, leaving the Russian market essentially rudderless. An otherwise fundamentally positive domestic outlook was offset by newswires about the impending destruction of Yukos. The landmark verdict in the Khodorkovsky case – awaited impatiently on Monday – coupled with the complete takeover of the disgraced oil major by Rosneft, created a drag on equity market momentum.

On the upside, consumer and telecom shares have been added to the MSCI index. Morgan Stanley Capital International reweighted its MSCI Russia Index to include the depositary receipts of AFK Sistema, MTS, VimpelCom, Mechel and Wimm-Bill-Dann. The dollar-denominated equity of Volga Telecom and Transneft prefs will also receive index weightings. And while the old “oil economy” will be bumped down a few notches, which will put some pressure on the RTS, we are upbeat on the rebalancing due to its new focus on “new economy” consumer and commodity plays. We believe this development will ultimately be a strong positive not only for the market caps of the newly listed shares, but also for the Russian equity market as a whole.

Recapping Saturday’s gainers and losers, RTS blue chips ended mixed within a band ranging from +0.47% (Sberbank) to +3.23% (Tatneft). The RTS index advanced 0.2% to 642.48 on a trickle of trading volumes totaling $1.6 mln.

MICEX blue chips also closed down within a thinner band from -0.05% (Surgutneftegaz) to -0.65% (Rostelecom). The MICEX index eased -0.22% to 578.76 on ultra-light volumes amounting to $154.76 mln.

Meanwhile, Gazprom traded up 0.4% to Rub 76.49 on SPICEX, with 5.5 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 16th May, 2005

There was no green on the screen in Russia’s equity trading Monday. The downturn gathered impetus on the strong likelihood that a harsh sentence will be handed down shortly in the Khodorkovsky, Lebedev and Krainov case. The former head of Yukos has already been found guilty of fraud and embezzlement and faces a maximum prison term of 10 years. The sentence will be read out within the next couple of days.

The market was also downbeat over growing concern that the Gazprom-Rosneft merger could be called off. Industry and Energy Minister Viktor Khristenko recently stated that the state does not necessarily need to merge Rosneft in order to gain a majority interest in the gas mammoth. An alternative could be for the state to pick up the needed shares by selling off a stake in Rosneft to a Chinese or Indian oil company. The point of such a deal would be to make sure that Gazprom’s hands are not tied by an onerous debt burden or Western litigation from having swallowed up Yuganskneftegaz.

Against this backdrop, most RTS blue chips traded down within a band ranging from -0.36% (Surgutneftegaz) to -0.62% (Lukoil). The RTS index pulled back 0.56% to 638.90 on thin volumes amounting to $9 mln.

MICEX blue chips sank even deeper into the red on Monday with most closing within a spread ranging from -1.7% (Sberbank) to -5.3% (Mosenergo). The MICEX index dipped 2.48% to 564.43 on trading volumes totaling $463.48 mln.

Meanwhile, investors turned on Gazprom (-3.2%) with a vengeance, with the gas monopoly sliding to Rub 73.96 and $18.2 mln changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 17th May, 2005

The market started to correct up moderately in early Tuesday trading. But towards the end of the session a major positive broke when Gazprom and the Economic Development and Trade Ministry went public with a statement about the state’s firm resolve to raise its stake in Gazprom which preludes the end game of removing the ring fence. This big piece of upbeat news caused blue chips to surge across the board and brought a welcome relief rally to the gas monopoly.

According to Gazprom’s BoD chairman Dmitry Mendeleyev, the merger with Rosneft is off and the state will secure a controlling stake in the gas mammoth by paying out cash for the needed equity. The equity will be acquired at fair market price. The state plans to finance this deal by taking out loans from leading global financial institutions and pay for it by putting up a stake in Rosneft for sale on the open market. The deal should be pulled off before the gas monopoly’s AGM, which is slated for June 24, according to the company’s press release.

The following blue chips finished Tuesday’s trading session as decliners: NorNickel (-1.2%), Surgutneftegaz (-1.04%), while on the other side of the spectrum the following blue chips ended up in the black: Sberbank (+0.95%), UES (+1.06%) and Lukoil (+2.7%). The RTS index advanced 0.63% to 637.71 on still thin volumes amounting to $9.9 mln.

Trading was more upbeat on MICEX with major stocks posting healthy gains ranging from +2.4% (Rostelecom) to +14% (Mosenergo). The MICEX index was up 4% to 587 on bigger volumes totaling $733.49 mln.

But the top winner of the day was far and away Gazprom, which walked away with a market cap 6.5% higher than at the previous close. The gas monopoly saw the last deal go for Rub 78.77 with a massive 45.4 mln shares changing hands on SPICEX.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 18th May, 2005

Trading was visibly upbeat on the Russian equity market Wednesday on the back of yesterday’s news that Gazprom, Rosneft and the relevant government agencies have finally worked out the road plan for the state to obtain majority control over the gas monopoly. Since this news broke late yesterday afternoon, only MICEX had the chance to respond. As a result, benchmark RTS felt the delayed reaction of this development in Wednesday’s session, whereas trading was mixed on MICEX.

On the downside, a fair amount of negativity built up on rumors of PM Mikhail Fradkov’s imminent resignation, although after an official disclaimer stocks began to drift north again. The main blue chip under fire was bellwether UES, which runs the risk of seeing the power reform process dragged out if the Cabinet goes down.

Against this checkered backdrop, most RTS blue chips landed in positive territory within a band ranging from +0.9% (Rostelecom) to +3.08% (NorNickel). The RTS index advanced 1.52% to 647 on still rather light volumes amounting to $11.4 mln.

MICEX was less upbeat with blue chips closing within a range from +0.24% (Sberbank) to +4.03% (Yukos). Other stocks, including NorNickel (-0.78%) and Rostelecom (-1.19%) ended up in the red. The MICEX index was flattish (+0.06%) on slightly under-average volumes totaling $713.99 mln.

Gazprom was still riding the crest of Tuesday’s wave as the company seems to be well on its way back towards testing the Rub 80 resistance level, if not higher. The gas monopoly added on 1.54% to Rub 78.98 on SPICEX with another big turnover - 31.13 mln shares - changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 19th May, 2005

Thursday’s trading was mixed on the Russian equity market. Rising Western stock indices coupled with declining global oil prices created an uncertain environment for investors. The internal news flow was moderately positive.

The media reported yesterday that Morgan Stanley has wrapped up its valuation of Rosneft along with the required stake in Gazprom and forwarded it to the Federal Property Management Fund. However, the independent appraiser said it would only make an official comment once the state property agency has publicly acknowledged receipt of the appraisal report.

The other piece of news, shrugged off by the market, was a report that a $13.3 mln tax claim was served against MTS. As a matter of fact, the ADR stock quotes of Russia’s number 1 operator were flat by the close of yesterday’s trading session.

Trading on the benchmark was a mixed bag on Thursday, with RTS advancers including: Rostelecom (+0.25%), Sberabank (+0.31%), NorNickel (+1.45%). The decliners featured Lukoil (-0.30%) and UES (-0.35%). The RTS Index was down fractionally (0.05%) to 647.08 on light volumes amounting to $5.5 mln.

MICEX blue chips were also mixed yesterday: the gainers closed within a band ranging from +0.17% (Sberbank) to +0.58% (Sibneft). A number of companies closed in the red, including NorNickel (-0.09%), UES (-0.19%), Tatneft (-0.26%) and Mosenergo (-2.16%). The MICEX Index eased 0.09% to 586.8 on thin volumes totaling $582.27 mln.

Gazprom finally ran out of steam yesterday, losing 0.39% on SPICEX. The last deal was closed at Rub 79.49 with 11 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 20th May, 2005

Russian stocks saw more mixed trading Friday on slim volumes. Market participants opted for the sidelines on the last day of the week given the lack of any pronounced domestic drivers and the likelihood of a protracted outcome in the Khodorkovsky trial. The 3-man panel of judges is reading at a slow clip, only about 20-30 pages a day and they only work until 2 pm. At this rate, the verdict could take until doomsday, and Russian authorities have succeeded in turning a tragedy into a farce.

More negativity arose from what has become nearly the regular occurrence of tax claims as the Murmansk inspectorate for large taxpayers came out with a Rub 5.37 bln ($191 mln) claim against Apatit based on the results of a 2001 field audit.

The only RTS blue chip that saw much action on Friday was Lukoil (+0.3%), whereas NorNickel (-1.79%) and Rostelecom (-0.34%) marked time at their Thursday closing levels. The RTS index eased 0.99% to 646.50 on ultra-thin volumes amounting to just $2.2 mln.

MICEX trading was also largely downbeat with the gainers moving within a range of +0.2% (NorNickel) to +0.5% (Rostelecom). On the negative end of the spectrum, the band of decliners varied from -0.003% (Lukoil) to -1% (Sberbank). The MICEX index landed at 585.68 (-0.19%) on thin volumes totaling $562.27 mln.

Far and away the best success story of the day was Gazpom on encouraging statements from Russian authorities about the state gaining majority control over the gas monopoly and lifting the ring fence, albeit a little later than market players had hoped. Gazprom shares finally broke through the Rub 80 resistance level, jumping 1.27% to Rub 80.5% with 17.2 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Vladimir Putin challenges the government

On Friday, Russian President Vladimir Putin at a meeting with Economic Development and Trade Minister German Gref pressed the government to stick to its task of reining in inflation within the 10% target in 2005. Gref voiced his opinion that the government “has a chance to limit inflation to 10% or perhaps slightly higher”, although YTD the CPI already stood at 6.5% in April 2005 (against 4.5% in January-April 2004). Meanwhile, German Gref is hopeful that the inflation rate will not exceed 0.6% in May (consumer prices spiked by 0.3% in the first 16 days of May).

German Gref disagrees with the IMF forecast which puts Russia’s FY2005 CPI at 11-11.5% in 2005. Meanwhile, we do not view reining in inflation at 10% (much less the previous official target of 8.5%) as realistic. The major drivers, which stoked inflation in the first few months of 2005 were higher communal housing tariffs and food prices. In April, the impact of communal tariffs began to soften, while gasoline prices rose sharply (up nearly 3%). Rising domestic fuel prices are becoming an increasingly serious problem. Gref rightfully pointed out during a meeting with Vladimir Putin that the RF government would like to escape the Ukrainian experience in regulating the oil products market, which eventually resulted in a fuel crisis. Putin responded that a shortage of gasoline at filling stations “is bad although losing control over the inflation rate is no better”.

In our opinion, the government could move towards meeting the President’s inflation challenge by imposing tougher regulatory measures on natural monopolies, and by changing taxation of oil companies for exportable oil products in order to encourage that more oil is refined instead of exported. As for anticipated toughening of the fiscal policy for curtailing inflation, its positive impact would be minimal, since main inflationary drivers are non-monetary, while risks are associated with an aggravated financial environment for domestic industry and a further slowdown in economic growth. Thus, in attempting to deal with the “foreign currency exchange rate vs. inflation” dilemma monetary authorities will likely opt for more radical ruble appreciation (cutting monetary supply) in order to ease inflationary pressure. In this sense, the dollar’s recent unexpectedly sharp appreciation against key global currencies has given a shot in the arm to the Bank of Russia, since it relieves pressure from Russia’s huge trade balance surplus on the ruble appreciation rate which has been eroding the competitive edge of domestic producers. However, for the time being it is hard to say whether this is a stable and long term trend.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 23rd May, 2005

The Russian stock market exhibited faint signs of growth on lackluster volumes Monday. Trading dynamics got a boost from Western markets. However, the overall lack of transactions points clearly to the fact that foreign investors have opted for the sidelines until the Khodorkovsky trial pans out. The internal news flow was moderately upbeat. The highlight of the day was details which show that the state’s plan to consolidate a controlling stake in Gazprom are on track.

Newswires reported that FGUP Tekhnopromexport, a shareholder of Rosneftegaz, approved an additional issue valued at Rub 734 mln (about $26 mln) on May 20. A total of 18.4 bln shares will be issued with par value of Rub 10, according to the issue prospectus of Tekhnopromexport. The issue is to be placed by closed subscription in favor of the Federal Property Fund, which will then contribute 100% of Rosneft’s equity to the chart of Rosneftegaz, a special-purpose investment vehicle to be used to purchase the 10.7% stake in Gazprom that will give the state a majority holding in the gas giant.

The only blue chips that saw any action yesterday were Tatneft, Sberbank and bellwether UES, which ended flat compared to the previous close and Rostelecom (+0.5%). The RTS index pulled back 0.04% to 646.22 on more soft volumes amounting to just $2.2 mln.

MICEX trading was a bit brisker, with most blue chips ending up within a band ranging from +0.08% (Sberbank) to +0.9% (Mosenergo). The decliners included Tatneft (-1.97%) and Sibneft (-0.1%). The MICEX index advanced 0.24% to 587 on trading volumes which totaled $427.54 mln.

Meanwhile, Gazprom eased a little on SPICEX Monday, closing down 0.4% to Rub 80.2 with 9 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 24th May, 2005

The Russian equity market jolted back to life on Tuesday after many days of sluggish trading. This time there is no doubt that foreign investors got into the act. The rally was not fueled by any major news on the internal front as the market took the lead from leading western markets. It was encouraging to see that foreign investors again showed robust interest in Russian equities.

Topping the bulls was Lukoil, which was hot to trot on upbeat expectations on the eve of the release of the oil producer’s FY 2004 GAAP financials. The market consensus is looking for strong figures with revenues expected to rise 52% to $33.8 mln and net income to hit a new high of $4.1 bln. What’s more, the major is also said to be on the verge of wrapping up a deal to grab a controlling stake in Dragon Oil, which engages in E&P of crude oil on the Turkmen shelf of the Caspian shelf, thereby adding even more to the allure of the company.

There was plenty of green to be seen on the screen all the way across the board yesterday, with most RTS blue chips advancing within a band ranging from +1.57% (Sberbank) to +2.99% (Rostelecom). The RTS index moved up a healthy 3.63% to 669.65 on much heavier volumes we hadn’t seen for some time, totaling $20.7 mln.

MICEX blue chips were also in a bullish mood Tuesday, with gains ranging from +0.6% (Mosenenergo) to +4.8% (Lukoil). The MICEX index added on 3.1% to 605.32 on strong volumes amounting to $816.85 mln.

Gazprom lagged a little behind the rally and underperformed both RTS and MICEX. By yesterday’s close, gas monopoly was up 1.12% to Rub 81.1 with 19 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
NorNickel: Kinross viewed as contender for merger

Polyus, the management company for NorNickel’s gold assets, is in talks with Canadian gold miner Kinross over possible merger. However, Polyus’ spokespersons point out that NorNickel is holding similar negotiations with other companies listed on the Toronto and New York stock markets.

For the record, the merger with a foreign company is viewed as part of spinning off the metal maker’s gold business as a separate company and getting this company listed on international capital markets after 2007. The spin-off is expected to be complete in March 2006.

Kinross is the world’s eighth largest and Canada’s third biggest gold producer. The company owns gold assets in the Magadan region (98.1% in Omolonskaya Gold Mining Company which holds a development license for the Kubaka gold deposit) and this could make the merger more appealing for both parties. The Canadian metal maker’s business in Russia is not very successful and management of the Russian gold mining company even announced that the company could be sold off or shut down.

We are upbeat on NorNickel’s gold assets being spun off as a separate company and maintain that this step will enable investors to estimate more fairly and push up their value.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 25th May, 2005

After a spurt to the upside for no apparent reason on Tuesday, the Russian equity market corrected back down yesterday. Needless to say, yesterday’s widespread power outage knocked the wind out of trading. Mosenergo became the main whipping boy and bellwether UES also took a beating after President Putin’s statement that he would lay all the blame for the outage in Moscow and the entire Moscow region on the management of UES, which he blamed for giving short shrift to current operations while focusing solely on trouble-shooting.

After the major domestic trading platforms got back up and running (RTS at 2:30 pm and MICEX at 3 pm) blue chips made a feeble attempt to rally, only to roll back by the close.

Most Russian blue chips ended up in the red as a result of the mayhem caused by the power outage Wednesday, with the top decliners closing within a band ranging from -0.57% (Lukoil) to -1.52% (UES). NorNickel (+0.34%) saw modest gains. The RTS Index was fractionally down (-0.06%) to 669.24 on lower-than-average volumes amounting to $15 mln.

MICEX trading was also dampened by yesterday’s unexpected train of events, with the decliners falling within a band ranging from -1.03% (Tatneft) to -3.9% (Mosenergo). The MICEX Index settled at 595.75 (-1.58%) on volumes totaling $607.25 mln.

Meanwhile, Gazprom fell along with the market, shedding 0.65% on SPICEX, with the last deal closed at Rub 80.57 and a mere 1.5 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Wednesday’s power outage could seriously damage Mo

On Wednesday, a power outage occurred at one of Mosenergo’s Moscow substations which caused an avalanche-type blackout at a number of the company’s key electricity facilities. As a result of the mishap, the city saw massive power supply interrruptions, the water supply was partly off in the Russian capital and traffic was snarled.

Discounting the terrorist attack scenario, the outage was most likely caused by obsolete power generation equipment. The average depreciation rate of equipment at Mosenergo’s production facilities is at least 50% and over the past 10 years repairs and capital construction have been underfunded.

By and large, statistical data show that the human factor accounts for 60% of all breakdowns, but given the obsolescence of Mosenergo’s utilities the actual situation could be even worse.

For the record, breakdowns similar to the one yesterday happen not on a daily basis, but quite often. The are reminiscent of major outages in California and north-east of the US – at Niagara, where a blackout reached nearly all the way across Boston and many Canadian cities. Last autumn, Europe saw a similar case in Northern Italy when the power went out all the way to Rome.

However, until yesterday Russia had managed to escape major power industry blackouts. We view the chain of events as follows: the utility’s power facilities experienced a massive failure, causing a system-wide malfunction. In the event protection relay works properly, the damaged segment is isolated and electrical load is redistributed, thus avoiding an accident. In the event of a protection relay malfunction, the accident spreads in wavelike movement throughout the network. As for problems in the Moscow subway in Moscow, railroad substations which supply power to trains are highly vulnerable to all failures due to their large-scale power consumption.

The Moscow outage underscores problems which exist in the domestic electrical power industry where depreciation of fixed assets can run as high as 60-65%. Over 15% of the equipment in the sector is significantly worn out and financing all costs required to maintain and boost production capacities in the sector in line with market requirements is the major reason behind the state’s decision to restructure the industry in order to attract private investments.
 
Russian Stock Market. Daily Review. 26th May, 2005

The Russian equity market saw mixed trading and modest growth on Thursday. The mood yesterday was still largely under the sway of Wednesday’s power crisis and the government has UES pegged as the culprit. The blame game resulted in a jittery environment Thursday with rumors and threats of “the unsinkable” Anatoly Chubais being sacked as head of UES for failing to prevent the power outage which will likely see massive claims for damages filed against the holding. Chubais himself will be subject to a probe under Article 293 of the Russian Criminal Code (“Negligence”).

It goes without saying that investors’ hopes for rapid and smooth completion of power industry restructuring will be dashed if Chubais is dismissed, not to mention more negative PR hype which could further besmirch Russia’s flagging investment image. However, the fact that Chubais did not show up for his interrogation at the office of the Prosecutor General yesterday leads us to believe that he has already found an inside track with Russian authorities to ensure his survival. We also believe that neither the government and President Putin have more to lose than gain by escalating the conflict or forcing the UES CEO to step down.

Against this backdrop of swirling emotions RTS blue chips were none too bullish yesterday, with the top decliners including UES (-1.37%) and Rostelecom (-0.24%). On the other side of the equity spectrum was Lukoil (+0.43%), which saw a little black ink. The RTS Index was 0.21% higher at 670.65 and still lower-than-average volumes totaling $13.4 mln.

MICEX trading was also a mixed bag on Thursday with the decliners finishing within a band ranging from -0.15% (UES) to -1.1% (Sibneft). The advancers fell within a spread from +0.2% (Mosenergo) to +1.4% (Lukoil). The MICEX Index settled at 597.09 (+0.23%) on trading volumes amounting to $749.65 mln.

On the SPICEX front, Gazprom slipped back below the Rub 80 mark, easing 0.88% to Rub 79.86 with 14.6 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
UES stock quotes are marred by the power outage

The consequences of the breakdown at Mosenergo’s substation in Chagino continue to take a toll on UES stock quotes. The power holding’s shares dipped for the second day in a row yesterday. News on the repercussions of the breakdown, the possibility of claims against UES and a criminal probe after the events of May 25 has dampened investor sentiment towards these stocks.

At present, many large companies are pondering whether to file claims against the company management, including Russian Railroads Co., the Moscow refinery, etc. Experts have advanced differing estimates of the damage wrought by the technogenic catastrophe. In our opinion, the most downbeat position was voiced by vice mayor of Moscow Valery Shantsev, who estimated the losses inflicted against the city at $1 bln.

Interestingly, a similar amount is provided for under the power holding’s 2005 investment program, while UES’ market cap amounts to about $12 bln. It’s also noteworthy that an accident at a single substation caused the fatal outage.

We believe this incident cannot help but rivet more attention on the problem of obsolete equipment in the domestic utilities sector. Moreover, this grim state of affairs is the prime mover behind the government’s decision to restructure the industry, since a lack of electric power due to worn out equipment and an insufficient rate of replacement is expected to be felt by as early as 2008.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 27th May, 2005

In early Friday morning trading blue chips staged an attempt to rally on positive news from Western equity and commodity markets. But in the absence of internal drivers, the market receded into a side trend punctuated by losses during the afternoon session. Negativity came from newswires which reported the Prosecutor General’s Office as having interrogated a number of UES and Mosenergo officials and confiscated some incriminating evidence from the offices of these companies.

Gazprom shares came under pressure Friday on news from the Ministry of Industry and Energy that the state is doubtful whether it will be able to deliver on its promise to consolidate a controlling stake in Gazprom by the June 24 AGM. Deputy head of the ministry Ivan Materov said the Russian government intends to review matters pertaining to gas industry restructuring before gaining control over the state gas monopoly. This statement came as another harsh wakeup call for investors, who will once again see their hopes shattered due to fudging on the timeframe for ring fence removal.

The band of modest RTS gainers on Friday ranged from +0.14% (Lukoil) to +0.49% (Rostelecom). Topping the list of losers was Mosenergo, which is still taking flak over Wednesday’s disastrous power outage. By the close, the RTS Index advanced by 0.11% to 671.40 on thin trading volumes equal to $7.8 mln.

A number of MICEX blue chips also finished within a narrow spread which varied from +0.07% (UES) to +0.76% (Sibneft). The decliners included Mosenergo (-2.42%), Surgutneftegaz (-0.42%) and Lukoil (-0.36%). The MICEX Index settled at 597.33 (+0.04%) on soft volumes totaling $571.15 mln.

Meanwhile, Gazprom ended 0.3% down on SPICEX, with the last deal closed at Rub 79.61.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
IFC picks up 1% in Novatek

International Finance Corporation (IFC) has inked an agreement to purchase a 1% stake in Novatek. The value of the deal has yet to be disclosed. IFC spokespersons attribute this decision to their aspiration to draw additional resources into the Russian gas sector. To date, IFC has made no investments aimed at developing the Russian gas industry.

On the whole, we are upbeat on this development. The entry of a world-renowned financial corporation into the equity structure of Novatek will have a positive impact both on the company’s manageability and its investment appeal. For the record, recently it was reported that a 5.61% stake in the gas producer was assigned from non-commercial organization Yamal Regional Development Fund to Vneshekonombank which can also be read as a certain “guarantee of “political stability”.
 
Russian Stock Market. Daily Review. 30th May, 2005

The Russian equity market saw sluggish trading predominantly in the red on Monday. Memorial Day in the US dampened the activity of foreigners on the domestic market while high commodity prices gave the Russian market a boost. A mild negative was France’s rejection of the EU Constitution in yesterday’s referendum, which throws up a roadblock to European integration. As a result, the euro plunged against the greenback, making dollar-denominated assets look more attractive. And it’s no secret that a rising dollar is bad news for emerging markets, including Russia.

On the upside, Gazprom shares traded up on news from the Russian Federal Property Fund that the state is set to proceed with its plan to raise the state’s stake in the charter capital of Gazprom on the heels of an appraisal by Morgan Stanley which values the gas monopoly in the range of $78.2- 92.32 bln ($3.30-3.90 per share). This way, the cost of the 10.74% stake the state needs to reach a majority holding would be $8.39 - 9.92 bln. On top of that, Gazprom’s official appraiser, Dresdner Kleinwort Wasserstein (DrKW) found the stake to be worth $10.2-115 bln. One way or another, the market took cheer in the fact that the appraisals have been completed and were made public, which means the deal is still on track.

By Monday’s close, most RTS blue chips dipped within a spread ranging from -1.00% (UES) to -2.30% (NorNickel). The RTS Index eased 0.69% to 666.79 on thin volumes amounting to $8 mln.

MICEX blue chips also ended up largely in negative territory yesterday, within a range varying from -0.01% (UES) to -1.00 (Mosenergo). Sberbank (+0.8%) bucked the trend and saw modest gains. The MICEX Index settled at 596.15 (-0.2%) on soft trading volumes which totaled just $386.3 mln.

Meanwhile, Gazprom (+0.2%) was marginally up on persistent hopes of upcoming liberalization and removal of the ring fence, with the last deal going for Rub 79.74 and 9 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Rambler lines up IPO on LSE

As Interfax news agency reported, Rambler media group will most likely float its shares on the London Stock Exchange in the alternative investments section within a week. All information about the company itself, its financial performance and the upcoming IPO have been thoroughly concealed from the Russian investment community.

Rambler Media holding includes web portal Rambler.ru, ISP Rambler Telecom, online advertising agency Index20, mobile services firm SMXCOM, broadcasting corporation Rambler TeleSet and news portal Lenta.ru.

United Financial Group and Aton are the IPO arrangers. According to preliminary data, the company is to offer 30% of its shares for $50 mln. This means that the company values itself at $167 mln.

According to our interim data, the fair price of Rambler’s 100% block of shares stands at about $62.5-$75 mln. Thus, we maintain that the 30% equity stake to be offered to investors looks overpriced. On top of this, we do not rule out that investors will be presented with information that guarantees 100% subscription of this stake.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
Russian Stock Market. Daily Review. 31st May, 2005

Tuesday’s trading mood was set by the long-awaited verdict that was finally handed down by the Moscow Meschanky Court. Most blue chips were in the red yesterday morning as the market waited impatiently for the final judgment in the Yukos case. A rally got under way, however, after the verdict was made public. Cynically as it may seem, the drawn-out trial proceedings triggered uncertainty and any outcome at all came as a welcome relief to the jittery market.

The sentence served against Khodorkovsky, Lebedev and Krainov, which took 12 long tortuous days to read out, was nearly the harshest one possible, with Khodorkovsky and Lebedev each getting nine years in a medium security prison and co-defendant Krainov picking up a 5-year suspended sentence. Plans are already underway to launch a wave of appeals both in Russia and abroad and there is already conjecture that despite the heavy-handed sentence, Khodorkovsky and Lebedev could be free within 2-3 years in the wake of this “travesty of justice”.

The relief rally which followed the Khodorkovsky sentence saw most blue chips trending up comfortably within the black. The range of advancers varied from +0.12% (Rostelecom) to +1.92% (NorNickel). The RTS Index advanced 1.11% to 647.19 on heavier-than-usual volumes of $23.8 mln.

MICEX blue chips were also glad to see the verdict over and done with and the band of gainers ranged from +0.2% (Surgutneftegaz) to +3.6% (Sibneft). Mosenergo (-3.3%) ended up in the red. The MICEX Index settled at 603 (+1.3%) on volumes totaling $732.08 mln.

Meanwhile, Gazprom also got in on the action yesterday with the last deal going for Rub 80.65, which is 1.14% higher than the previous close and 7.7 mln shares changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
UES to join e7 Energy Forum

According to the power holding’s press service, a UES delegation chaired by deputy chairman Leonid Drachevsky will take part in the annual Energy Forum e7 summit. The power holding is to be recognized as a full-fledged member of e7 at the summit on June 1-2.

Since e7 is an international organization, in which nine major energy companies from the G8 countries are members, the entry of UES into this alliance will positively impact the corporate image of the Russian power holding in the eyes of the international investment and energy community.

However, we again underscore the growing need for the power holding to focus on its core activity of utility sector reform in Russia and upgrade domestic electric power facilities. We maintain that in light of the recent blackout in the Moscow energy system last week, the power holding will temper its expansionary ambitions.

Finam
Russian Brokerage Company
http://www.fin-rus.com
 
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