SKB-Bank reports bad world news affects Russian stock market

‘Bad world news has been affecting Russian stock market quite negatively,’ Alexander Sterkhov of SKB-Bank says.

‘Throughout last week, our stock market kept waiting to hear from the U.S. monetary authorities, which resulted in relatively small trading activity and RTS index fluctuations between 1,910 and 1,940 points. The index amounted to 1,892.3 points at the close of business on May 10, 2007 (which was 1.75% lower than a week earlier); MICEX index went down 1.86% and reached 3,299.6 points,’ he reports.

May 10, 2007 was the last day for applying for VTB’s IPO; the number of applications is reported to exceed the volume of shares by five to ten times; this oversubscription will probably motivate the investors to buy shares on the secondary market, which is why we expect the prices to go up after the initial public offering. We believe the public offering price should come close to the upper price range, that is, .139 RUR per share,’ Mr. Sterkhov observes.

‘The U.S. Federal Reserve System chose to keep the discount rate as it was (5.25%); they still tend to see the accelerating inflation rate as the major risk facing them at the moment. American economy has been slowing down since the beginning of the year, and housing problems appear to have grown worse. This was no surprise for investors, though, so the prices on the U.S. stock market did not experience any dramatic changes. The European Central Bank was reported to keep the rate at the original 3.75% last Thursday, whereas the Bank of England raised its rate to 5.5%. This was bad news, so most European stock indices dropped at the close of business last Wednesday. Russian markets followed suit. I see the possible global rate growth as the main cause of our market’s decline in the months to come,’ Mr. Sterkhov maintains.