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Source Research
November 12, 2014
UFS IC No new sanctions alleged to be imposed, we expect the market to keep growing. Comment: NLMK.
Global Markets and Macroeconomic News ·         Brent’s value is losing amid the negotiations between the USA and Iran. ·         The EU wants to increase the banned list of Russians.   Debt Market ·         German Chancellor Angela Merkel stated that no sectoral sanctions were to be introduced against the Russian Federation. The news is positive for the Russian sovereign and corporate Eurobonds.   Comments ·         NLMK Group posted its consolidated financial results for 3Q and 9M 2014. Its US GAAP net income is increased almost threefold. The credit portfolio remains strong. We recommend buying NLMKRU-18.  
November 11, 2014
UFS IC APEC positively affects yield of bonds. CBM’s Eurobonds have an idea. Comment: CBM.
Global Markets and Macroeconomic News ·    The APEC summit is in session in Beijing. ·    The bank of Russia decided to allow the ruble to float freely, having abolished the currency corridor. ·    The Central Bank of Russia restricts the provision of ruble liquidity for purchase of the foreign currency.   Debt Market ·    Today the stock exchanges are closed due to Veterans Day in the USA, as well as in France. We expect the yield of the sovereign and corporate Russian Eurobonds to decline. We suppose that NLMKRU-18 is oversold amid the news on good financial results, we recommend investors to buy this issue.   Comments ·    Fitch affirmed the rating of Credit Bank of Moscow at 'BB' with a stable outlook last Friday. The rating of the subordinated debt is set at 'BB-'. Owing to the strong financial results for 1H 2014 we note that currently Z-spread between CRBKMO-18sub and CRBKMO-18 widened to a historic high of 407 b. p. We expect the spread to narrow from 407 to 355 b. p. We recommend investors to buy CRBKMO-18sub.
November 10, 2014
ROSBANK Eco Analysis - Russia: CBR abandons operative currency band
UFS IC Gazprom has agreed the final price for gas supply to China. The prepayment for the Power of Siberia pipeline is not considered. The market will rise slightly in the morning. Comment: Gazprom.
Global Markets and Macroeconomic News ·         The US unemployment rate reduced to 5.8% due to the decreased number of vacancies. ·         The euro is strengthening owing to the strong statistical data from Europe. ·         During the visit to Beijing Russian President Vladimir Putin will meet with Chinese President Xi Jinping, as a follow-up to that meeting, it is planned to sign a big package of documents.   Debt Market ·         Today the APEC summit will continue to take place, where the leaders of the states and government of different regions will gather. Russia’s president Vladimir Putin will address the APEC summit. The market will follow his statements, and we expect a slight rise in the morning.   Comments ·         Gazprom and China have signed a framework agreement for gas supply of 30 billion cubic meters to China annually from the deposits of Western Siberia. Along with the construction of the Power of Siberia and the Altai gas pipeline, Gazprom will have to enhance the deliveries, and Alexey Miller noted that the gas was planned to deliver from the Far East.
November 07, 2014
UFS IC ECB will purchase ABS within 2 years. OPEC will curtail the quota for oil production, if the price plunges below $70. Comment: PDVSA.
Global Markets and Macroeconomic News ·    The ECB kept the interest rate unchanged and intended to purchase assets. ·    US initial jobless claims declined by 10 thousand to 278 thousand claims during the last week.   Debt Market ·    Most members of OPEC do not expect the price to plunge lower than $75 a barrel in 2014. According to our estimation, if the market approaches this price level, then the pressure of some member-countries of OPEC will affect the budget, for example, the budget of Venezuela.   Comments ·    The bonds of the Venezuela’s oil and gas company PDVSA nominated in USD have already showed a rise in yield, varying from 21% to 40% in mid-October and plunged also so quickly. We recommend investors to follow the OPEC meeting scheduled for November 27, where the quota for oil production will be on the agenda.
November 06, 2014
UFS IC Severstal reduced the net debt manifold. Gazprom placed one-year Eurobonds at 4.45% in USD. Comment: Severstal.
Global Markets and Macroeconomic News ·         The euro lost in value on the weak statistical data from the euro zone and in the expectations of new incentives by the ECB. ·         According to Rosstat, the increase of the consumer prices in Russia amounted to 0.8% in October. ·         The Bank of Russia decided to limit the volume on interventions, when the upper boundary of the currency corridor is reached $350 million.   Debt Market ·         The corporate segment declined owing to verbal speculations on imposing tightened sanctions by the EU against Russia. ·         Today the short-term interest rate set by the ECB will be announced at 3: 45 p. m. The forecast stands at 0.05%, the previous value amounted to 0.05%. Then the ECB press conference will take place. ·         We expect an increased market dynamics in the afternoon.   Comments ·         Net loss of Severstal in compliance with IFRS amounted to $807 million in 9M 2014 versus the income worth $157 million in 9M 2013. The company plans to pay in advance $457 million of bank loans maturing in 2015, 2016 and 2017. Net debt reduced by 79.2% to $775 million as of September 30, 2014 against $3.74 billion as of September 30, 2013. Net debt decreased by 74.8% q-o-q from $3.08 billion to $775 million. At the same time, the company notes that the net debt will be risen after the 9M 2014 dividends of more than $1 billion will be paid out. We decided to close the profitable position in CHMFRU-18. As we have earlier written, the spread between CHMFRU-18 and NLMKRU-18 reduced almost to 0. We do not rule out that we will open this position again in a short period of time.
Eurasian Development Bank Activities of development banks in Eurasian countries.
Information digest (October 2014)
November 05, 2014
ROSBANK Eco Analysis - Russia: Central Bank of Russia spurs FX market reform
UFS IC Gazprom received the first tranche from Naftogaz. The European Commission stated the deterioration of the economic forecast. Comments: Gazprom.
Global Markets and Macroeconomic News ·         The ISM PMI in the USA rose by 2.4 p. to 59.0 p. ·         Investors gingerly follow the results of the elections to the US Senate. ·         Today APEC summit has started and will last until November 11.   Debt Market ·         Today the trading session will be volatile. Investors will focus on the data on ADP Non-Farm Employment Change at 4:15 pm (Moscow time) and the data on the ISM Services PMI at 6 pm (Moscow time).   Comments ·         Gazprom confirmed the receipt of the first tranche worth $1.45 billion from Ukraine’s Naftogaz for the earlier delivered and non-paid gas volume. The second tranche amounting to $1.65 billion is expected by the end of 2014. The news is positive for the Gazprom Eurobonds. 
ROSBANK Eco Analysis - Russia: The CBR delivers a massive rate hike
October 31, 2014
UFS IC The strengthened ruble sets the tone in the bond market. Comments: NOVATEK, Raiffeisen Bank, Russian Agricultural Bank, TCS Bank.
Global Markets and Macroeconomic News ·    According to the first assessment, the US GDP grew at a rate of 3.5 percent in the third quarter of 2014. ·    The trilateral gas negotiations between Russia, Ukraine and the EU led to an accord on natural gas supply to Ukraine and Europe over the winter.   Debt Market ·    Today we anticipate a slight decline in the government and corporate segments of the Russian Eurobonds. ·    Despite the considerable ruble appreciation, trades in the local bond market closed Thursday’s session with a decline of the world leading indices. ·    The main events of the upcoming holidays will be elections in self-proclaimed Donetsk and Luhansk People’s Republics, as well as the reaction of the Russian Federation and the European Union to these events.   Comments ·    NOVATEK announced IFRS financial results for 3Q and 9M 2014. The credit profile remains to be strong. ·    Yesterday Moody's Investors Service revised the outlook for long-term liabilities and deposits ratings of Raiffeisen Bank. The news is neutral for the bank’s bonds. In our view, Russian Agricultural Bank, and TCS, BO-06 look more interesting.
October 30, 2014
ROSBANK Eco Analysis - Russia: CBR to address inflation risks with a 50bp rate hike
October 29, 2014
UFS IC Markets await the Fed’s decision and end of the election in Ukraine. Comments: Gazprom Neft, TCS Bank, Promsvyazbank.
Global Markets and Macroeconomic News ·      The ECB does not see any signs of deflation in the Eurozone, but will keep abreast. ·      Fitch cut the long-term ratings of three Russian banks.   Debt Market ·      Yesterday yield of UST-10 edged up from 2.33% to 2.35%. Yield of the benchmark Russia-30 Eurobond deteriorated from 4.74% to 4.62% during the previous trading session. Today the Federal Reserve System will make a statement that the quantitative easing program is over. Today the markets will follow the Fed’s statement dealing with the base interest rate, being the vital issue of the day. ·      The negative dynamics persists in the local bond market. There is a lull in the initial offering market, which will take place until holidays, in our view. The Ministry of Finance decided not to hold a placement of OFZ today, given the current yield levels of government bonds, the decision looks quite logical and was expected.   Comments ·      Fitch affirmed the long-term IDRs of Gazprom Neft at BBB. ·      Yesterday Fitch downgraded the long-term Issuer Default Ratings of several retails banks and kept the rating of Tinkoff Credit Systems unchanged. Our short-list contains TCS, BO-06 (duration – 0.7 y., YTP – 13.38%, G-spread of 500 b. p.). In the mid-term we expect the dynamics will outperform the market. ·      Yesterday Moody's Investors Service affirmed the long-term local- and foreign-currency deposit default ratings of Promsvyazbank at Ba3. The confirmation of the ratings is triggered by the reduction of the negative factors for Promsvyazbank's ratings in 2 and 3 quarters of 2014. We find the new issue Promsvyazbank, BO-06 interesting, as the issue offers an attractive premium to OFZ.
Fitch Ratings Russian Banks Monthly Datawatch
October 28, 2014
UFS IC The strength of the ruble is determined by oil. Comments: Lenta, X5 Retail Group.
Global Markets and Macroeconomic News ·         According to the Markit preliminary data, the US composite PMI fell by 1.6 p. to 57.4 p. in October. ·         Russia’s GDP at annual terms grew 1.1% in September from zero in August.   Debt Market ·         The FOMC meeting is scheduled for October 28-29, where the interest rate will be announced. We suppose the US stock market will be volatile. ·         The morning rise in the local market, related to the maintenance of the Russia’s credit rating by S&P was evened by the weakened ruble, the decreased oil quotes and the verbal interventions of the government and CBR representatives regarding the further regulatory approach of the monetary policy in the country. Against this background the leading indices of the local market closed the session within the red zone.   Comments ·         Yesterday the New-York Fed conducted Permanent Open Market Operations (POMO) for the last time. Thus, it could be stated that the QE3 program is terminated. Its methods are ambiguous, however, it has led to the gradual recovery of the economy and resulted in injection of the economy with cash funds. Every time, when the quantitative easing program was launched, the US stock market grew cyclically until its end. Then the S&P 500 index was adjusted to 10-15%. And now we expect that this scenario will be repeated with the end of the QE3 program. ·         Yesterday it was reported about several deals of the domestic retail segment. X5 Retail Group is negotiating the sale of a share in its online project, and Lenta is preparing a deal on purchase of the hypermarkets. We prefer X5 Finance, BO-01 and Lenta, 03 as investment ideas in the context of the yield decline. 
October 24, 2014
UFS IC The main intrigue of the day is the S&P meeting on the sovereign credit rating of the Russian Federation. Comments: PhosAgro, Promsvyazbank
Global Markets and Macroeconomic News ·      US initial jobless claims increased by 17 thousand to 283 thousand units. ·      Investors expect the Standard & Poor's decision on the credit rating of Russia.   Debt Market ·      Today the market will close the session in red, pending the decision of S&P on the sovereign rating of the Russian Federation. If the rating is slashed, the situation will be intense in the corporate segment of the Eurobond market. ·      Yesterday the local debt market closed the day with a decline. The rising rates of consumer prices and the statements made by the representatives of the CBR push the players to think about the soon rise of the interest rate. The weakness of the Russian currency is against the market.   Comments ·      Yesterday PhosAgro, the leading global phosphate-based fertilizer producer, announced its production results for the nine months. The high production capacity utilization and the high demand for the company’s output allowed sales and total fertilizer production to be increased 4.3% and 5.6%, respectively. In our view, PHORRU-18 (YTM- 5.28%, Z-spread of 413 b. p.) may be served as an investment idea, but the decision of S&P on the Russia’s credit rating may exert pressure on the market. In this respect, we postpone the publication of the idea until Monday.   ·      Promsvyazbank rejected to provide loans to natural persons in September, who are not employees of the companies accredited by the bank. We welcome the bank intentions to reduce the share of high risky borrowers and focus on operations with the less risky segment. We stress the advantage of the bank that attempts to raise its capital, because the main problem of Promsvyazbank is low levels of the capital. We find Promsvayzbank, BO-06 placed in early October interesting. The shorter issues, such as Promsvayzbank, BO-02 and BO-04, maturing in February 2015, may be considered as assets suitable for the held-to-maturity strategy.  
October 23, 2014
UFS IC The ruble may offset some lost positions. Comments: Nordgold, NCSP.
Global Markets and Macroeconomic News ·      US CPI in September remained unchanged at 1.7% y-o-y. ·      Commercial oil stocks increased by 7.11 mn barrels over the last week. ·      Russia CPI improved 0.3% over the last week against a 0.2% rise over the week before last.   Debt Market ·    A big set of macrostatistical data on EZ countries will be published today. We assume that the market session will be volatile. ·    Yesterday the local debt market looked rather stable despite the negative aspect. The players’ activity increased considerably. Weekly consumer price statistics in Russia released by Rosstat yesterday turned out to be weak. Along with it, the Central Bank of Russia announced a possible rise in the interest rate by the end of 2014. The decreased oil prices and the weakened ruble also put pressure on Russian assets.   Comments ·      During the nine months, Norgold increased gold output by 13%, revenues by 2%, amounting to $961.8 million. The rise in revenues is triggered mainly by the increased output and sale of gold. We do not see any interesting ideas in the only one Eurobond issue NORDLI-18 (YTM – 7.92%, Z-spread of 676 b. p.) now. We recommend investors to look at CHMFRU-18 и NLMKRU-18 in the metallurgical sector. ·      Cargo turnover of Novorossiysk Commercial Sea Port (NCSP) in 9M2014 amounted to 101 million tonnes. Yesterday it was reported that NCSP Group and Metalloinvest company concluded an agreement on construction of a new terminal. We expect a neutral market reaction to the news in the quotes of NCSP. The only one issue is fairly evaluated by the market. The bonds of Transcontainer, having the similar rating and more qualitative credit profile, look more attractive.
October 21, 2014
UFS IC The downgrade of the sovereign rating does not scare Gazprom. Comments: TMK, Transcontainer.
Global Markets and Macroeconomic News ·         China’s GDP in 3Q 2014 grew 7.3% y-o-y against a 7.5% rise in 2Q 2014. ·         China’s industrial production in September accelerated the growth rate from 6.9% to 8.0% y-o-y. ·         American stock indices showed a rise due to positive expectations of Apple’s financial results and decreased risks for the early rise in the interest rates. ·         Moody’s cut ratings of seven major Russian banks. Debt Market ·    There was published statistical data on China this morning: GDP in 3Q 2014 rose 7.3% versus 7.5% in 2Q 2014. This factor may indirectly affect our market, and we expect the Russian sovereign bonds to consolidate. ·    The activity in the corporate bond segment is low for the second day in a row.   Comments ·    During the nine months, TMK the company shipped a total of 3.2 million tonnes of steel pipe, down 1.3% year-on-year. We regard the final operating results as neutral ones. TMK has 2 Eurobond issues (TRUBRU-18 и TRUBRU-20), which do not have any speculative ideas, in the Eurobond market. We recommend investors to look at CHMFRU-18 (YTM – 5.59%, Z-spread of 490 b. p.) and NLMKRU-18 (YTM – 5.69%, Z-spread of 463 b. p.), and consider them as the issuers with stronger credit profile. ·    OAO Transcontainer increased rail container transportation volumes in Russia for the third quarter of 2014 by 1.0%. The total transportation volumes increased by 1.8% and made up 1.093 million TEU, while the import volumes decreased by 19%. We regard the operating results as moderately negative ones. We do not expect the transportation market to recover in the near future. Transcontainer has a strong credit profile that plays a significant role. We have no doubts that the issuer is able to fulfill its liabilities. Transcontainer, 02 looks undervalued if compared with NSCP, BO-02 (duration - 0.5 y., YTM – 10.25%, G-spread of 176 b. p.), which has a similar duration and rating.    
October 20, 2014
UFS IC The compromise on the gas conflict will support the market. Comments: MMK Group, Russia, Renaissance Credit Bank.
Global Markets and Macroeconomic News ·         The ECB will start to buy back securities in the near future. ·         The Fed’s presidents are for the continuation of the extra soft policy. ·         Russia, Ukraine and the EU agreed the gas deliveries for the next few months. ·         Moody's lowered the rating of Russia from Baa1 to Baa2.   Debt Market ·         Last week investors focused on the corporate reports of the US companies in 3Q 2014, which look good so far. ·         James Bullard said that the FED should extend its bond-buying program and this statement weighted on the market. ·         Today a pessimistic mood will prevail because of the Russia’s sovereign rating lowered by Moody’s on Saturday.   Comments ·         MMK Group released operating results in 9M 2014 on Friday. We suppose that MMK reached such good results due to the decreased import of rolled metal products. ·         Moody's Investors Service cut Russia's sovereign debt rating to Baa2 from Baa1, the outlooks is negative. Moody’s assigned Russia the highest rating as compared to ones made by Fitch and Standard & Poor's. The agency’s decision is negative for the assessment of Russian assets. We expect the rise of sales in the local bonds despite the fact that the players have anticipated such risks. ·         On Friday Moody's Investors Service cut its long-term foreign currency and local currency deposit ratings on Renaissance Credit Bank from B2 to B3. The outlook is negative. The downgrade was driven by the bank's deteriorating asset and the weak financial results posted by the bank in 1H 2014. 
October 17, 2014
UFS IC Oil, having hit the bottom, gives a chance for the Russian market to bounce. Comments: NLMK, EVRAZ.
Global Markets and Macroeconomic News ·      Strong statistics from the USA and the statements made by Bullard supported the US market. ·      Oil has hit the bottom that gives a chance for the Russian market to bounce. ·      Putin and Poroshenko will meet in Milan that holds out hope for the de-escalation   Debt Market ·      We consider that today the Russian market will show a rebound in both sovereign and corporate bonds. ·      Sales provoked by the continuing fall in oil quotes prevailed in the local market yesterday. Besides that the weak ruble placed pressure on the market. We expect the positive dynamics in the Russian bonds today. We suppose that the participants will win back the rise of the oil quotes, which was observed by close of the Russian trading floors yesterday.   Comments ·      Yesterday NLMK Group posted the operational results over nine months of 2014.  The news is positive for the company’s bonds. We recommend investors to buy NLMKRU-18, which looks undervalued in comparison with the protective issue GMKNRM-18. We estimate that the spread should narrow from 82 b. p. to 50 b. p. ·      Evraz presented the operational results for 3Q 2014, which indicate a light decline of steel output on a quarterly basis. The company explains it by maintenance works. The news is neutral for the company’s bonds. Given the recent rise in the quotes, we find the decline potential of yield limited, although EvrazFinance, 03 suits the buy-and-hold strategy.
October 16, 2014
UFS IC Revaluation of risks makes investors buy sovereign bonds. Comments: Severstal, Probiznesbank, Russian Agricultural Bank, TCS, Renaissance Bank.
Global Markets and Macroeconomic News ·         Oil quotes renew their multi-year low points, creating pressure on the ruble and Russian indexes. ·         The statistics from the USA is disappointing that contributes to risky mood and flight to quality. ·         Russia’s industrial output skyrocketed in September.   Debt Market ·         Yesterday’s trading session was volatile for many world debt markets. ·         Due to the volatility observed in the debt markets of the USA and Europe, we expect the Russian Eurobonds to decline.   Comments ·         Yesterday Severstal posted the operational results for 9 months of 2014. We expect the consolidation in the bonds of Severstal and recommend investors to put CHMFRU-18 (YTM – 5.88%, Z –spread of 484 b. p.) in their short-list for purchase in the short run. ·         Fitch Ratings placed the rating ‘B’ of Probiznesbank in under review with a possible downgrade. We don’t expect a significant reaction in the one issue placed in the second market because of its low liquidity. In the banking sector we find attractive such issues as TCS, BO-06, Russian Agricultural Bank, Bo-07, Renaissance Credit Bank, BO-05.
October 15, 2014
UFS IC Central Bank of Russia simplifies the procedure of including securities into the Lombard list. Comments: Gazprom, ALROSA, Detsky Mir.
Global Markets and Macroeconomic News ·         Germany’s Economy Ministry cut its growth forecast for 2014 to 1.2% from 1.8%. ·         The International Energy Agency lowered the outlook of the demand for oil by 0.5 million barrels for 2014. ·         The EU will consider the issue concerning the cancellation of the sanctions against Russia in late October 2014. ·         The Bank of Russia plans to hold the first currency REPO auction for 7 and 28 days.    Debt Market ·         A negative trend still prevails in the local debt market: the weak ruble, the downside of oil quotes, talks on a possible downgrade of the sovereign rating. Yesterday the Ministry of Finance decided not to hold a placement of OFZ due to the unfavorable market backdrop that deepened the negative mood. ·         The weekly inflationary data to be published by Rosstat today is an important signal for the market.   Comments ·        Rosimushchestvo and ALROSA have signed a shareholder’s agreement. As the investment ideas we consider ALROSA, BO-01 (duration – 1 y., YTM – 10.4%), offering the premium to OFZ of more than 150 b. p. and ALROSA, 20 (duration – 0.7 y., YTM – 10.2%, G-spread of 80 b. p.), which suits the held-to-maturity strategy. ·        The deal concerning the purchase of a share in the retail network Detsky Mir by the Russia-China Investment Fund (RCIF) from AFK Sistema is postponed. Though the halt in the negotiations has a negative impact, we do not see a rise in the risks of Detsky Mir debt securities. Detsky Mir, 01 (duration – 0.6 y., YTM – 11.94%, G-spread of 335 b. p.) does not stand out by high liquidity and suits more under the buy-and-hold strategy.
October 14, 2014
UFS IC Investors focus on agreements with China. Comments: Russia, KAMAZ, Megafon.
Global Markets and Macroeconomic News ·         The Bank of Russia and the People’s Bank of China signed a currency swap deal up to $25 billion. ·         According to the IMF forecast for Europe for 2015, the bilateral sanctions between European countries and Russia are supposed to lift gradually. ·         The Bank of Russia held a three-month REPO auction, the repo rate amounted to 8.25% per annum.   Debt Market ·         On Monday no trades were held in the US market due to the holiday. The 0.5% rise observed yesterday in the quotes of UST-10 futures was instantly won back at the start of trading today. ·         The trades were slack in the local debt market. Closure of the US trading floors impacted the market activity due to the holiday. Today we expect a moderately positive dynamics against the background of the stabilization of the Russian currency.   Comments ·         Moody's Investors Service downgraded the corporate family rating of KAMAZ to Ba2 from Ba1. The outlook is negative. The downgrade of the credit capacity of KAMAZ I triggered by the expectations that the company’s financial results will deteriorate in 2014 and 2015. Moody’s analysts suppose that the upgrade of the company’s ratings is unlikely.   ·         Megafon signed a USD 500 million financing mandate agreement with the China Development Bank. It is not the first similar funding in the history of Megafon. The company traditionally takes out loans with the China Development Bank for financing the Huawei equipment. Megafon,BO-04 offers a premium to OFZ at 80 b. p., which looks, in our view, fair. We prefer VympelcomInvest, 06 among the issues of the telecommunications companies, taking in to account that the yield declines by 30-40 b. p.
October 13, 2014
UFS IC The decreased appetite to the risk pushes the UST quotes up. Comments: Rosneft, Russian Agricultural Bank.
Global Markets and Macroeconomic News • Weak outlooks for the European economy place pressure on the markets. • There was published a set of statistics on Europe, the data are generally weak. Debt Market • Signing the document concerning the gas deliveries from Russian to China via the eastern route may be a driver for short-term purchases in the Eurobond market. The decision on the document is preliminary settled for today. • The neutral dynamics is most likely to be observed in the US debt market due to the day off in the USA, Canada and Japan.  • The local debt market looked slack on Friday. The weakening ruble does not promote purchases. The players’ activity was the lowest one.  Comments • Yesterday Li Keqiang, Party Secretary of the State Council, arrived on a visit to Russia. About 50 intergovernmental, interagency and corporate agreements in different sectors are planned to be signed in the course of his visit. Signing agreements on energy cooperation by two strategic partners China and Russia is positive for a range of Russian companies which are going to benefit from development of these relations in future.  • The government will allocate 5 billion rubles from the budget at additional capitalization of the Russian Agricultural Bank (RSHB) till the end of 2014. We consider that RSHB is one of the banks which are best “protected” from the Western sanctions. Among the bank’s bonds we single out the issue of RSHB which is more liquid and short in terms of duration, i.e. BO-07. The issue is undervalued by the market. We estimate the potential of the yield decline at 25-30 b. p. Due to the short duration (0.65 y.) the bond suits the buy-and-hold strategy as well.
October 10, 2014
ROSBANK Eco Analysis - Russia: Money market anticipating a CBR rate hike - we are waiting for other measures
October 09, 2014
UFS IC The Fed minutes enhanced investors’ trust of keeping interest rates unchanged. Comments: NLMK, Severstal, TCS Bank.
Global Markets and Macroeconomic News ·      Publication of the September FOMC meeting minutes. ·      Brent oil price is increasing after release of the FOMC minutes. ·      The Bank of Russia raised the upper border of the currency corridor to 44.85 rubles.   Debt Market ·         We expect the volatility growth in Russian Eurobonds during the day. ·         Yesterday amid the continued weakness of the ruble and the negative data on Russia’s consumer price index made by Rosstat, indicating the acceleration of inflation, sales, having more than averaged volumes, prevailed in all segments of the local debt market. ·         Today the local debt market may rebound up, after sales, prevailing during recent trading sessions.   Comments ·         Among the Eurobonds of the metallurgists we recommend investors to buy CHMFRU-18, as we expect the positive dynamics to be maintained in the quotes of the issue. ·         Yesterday the Tinkoff Credit Systems Bank announced a new forecast for the net profit in 2014. The bank is expecting to earn the total net profit of 2.9 – 3.4 billion rubles (calculated in compliance with the IFRS) in the year 2014. In March the management board of the bank estimated the net profit at 7.2 – 7.8 billion rubles. We consider TCS, BO-06 (duration 0.7 years, YTM- 13.1%, G-spread of 465 b. p.) as an investment idea. Due to short duration TCS, BO-06 may be considered as an asset under the held-to maturity strategy.
ROSBANK Eco Analysis - Russia: Hard currency shortage – what it may imply for FX
October 08, 2014
UFS IC After the successful placement Volkwagen Bank Rus returns with new issues. Comments: Gazprombank, Volkwagen Bank Rus.
Global Markets and Macroeconomic News ·         Yesterday the IMF report ‘Prospects of the world economy development’ was published. ·         US oil production in September increased to 8.7 million barrels per day amid the expectations of the fall in the demand for black gold.  Debt Market ·    Yesterday the IMF trimmed its outlook of the world economy growth for 2015 to 3.8% against 4.0% in July and for 2014 from 3.4% to 3.3%. ·    Sales with high trading volumes prevailed in all segments of the local debt market. Bond trading volume totaled 10.5 billion rubles in all segments, it is the highest value since early September. ·    Today we expect that the negative trend will be observed amid the persistent weakness of the ruble and emerged investors’ fears related to the possible downgrade of Russia’s sovereign debt rating.  Comments ·    On Monday, October 6, Gazprombank Board of Directors approved the placement of bonds in the amount of $2.5 billion and 70 billion rubles in the domestic market, the total amount will make up 170 billion rubles. We recommend investors to buy the subordinated GPBRU-19 Eurobond of Gazprombank (YTM – 7.07%, Z-spread of 541) nominated in USD and GPBRU-23 (YTM – 8.88%, duration – 3.6 years) in USD. ·    Volkswagen Bank Rus plans to accept bids from investors for 10 billion rubles of 5-year bonds of series 8 and 9 on October 9. We find the participation in the placement interesting, as the new issues offer significant premiums to both its own and the bonds of the banks of the first tier that looks overvalued given the rating of the issue and the security from Volkswagen Financial Services AG.
October 07, 2014
UFS IC Issuers tend to take the advantage of the geopolitical lull. Comments: Uralkali.
Global Markets and Macroeconomic News • There were published a set of macrostatistics from Europe, the data are weak. • Yesterday SWIFT announced that it did not intend to cut Russia off from the payment system. • Currently Kiev considers a draft protocol for resumption of gas supply to Ukraine. Debt Market • The Russian benchmark Russia-30 Eurobond rose from 111.93% to 112.61% of the par value. Yield decreased from 4.94% to 4.80%. UST 10 gained 0.13% and closed at 99.13% of the par value • The season of reports for US corporations will start on Wednesday. We expect the volatility in US government bonds and Russian Eurobonds since the middle of the week. • The players’ activity was low in the local debt market and the dynamics of the leading world indices was multidirectional. Comments • On the basis of the results for 3Q 2014 Uralkali increased the production of potassium chloride by 18% compared to the corresponding period of the previous year. We positively regard the operational results of the company, as the certain part of production is aimed for export, which gives us confidence to say that the company will show good results nit only for 9 months, but also for the whole year. The news is positive for the company’s securities. However, we do not expect the outperformance in the quotes. We recommend investors to look at the PhosAgro PHORRU-18 Eurobond (YTM – 5.36%, Z-spread of 397 b. p.), yield spread on URKARM-18 has been considerably widened to 50 b. p. We suppose that the fair spread would amount to 30 b. p., the yield would stand at 5.05% from the current value of 4.84% and the price would make up 95.71% from the current reading of 96.35%.
October 06, 2014
UFS IC Surge of interest by municipals towards the primary market. Comments: Rosneft, Asian-Pacific Bank.
Global Markets and Macroeconomic News ·         US unemployment in September declined to 5.9% from 6.1% in August. ·         The Russian consumer price index in September, as it was expected, rose from 7.6% in August to 8.0% y/y. ·         The Bank of Russia increased the boundaries of the currency corridor twice on Friday.    Debt Market ·         Strong labour data from the USA released on Friday led to the improvement of the dollar and place the pressure on the Russian Eurobonds. ·         The results of the trilateral negotiations on gas will be significant information for our market. The date of the trilateral meeting will be determined after October 7. ·         The continued weakness of the ruble against the increased geopolitical tension resulted in the sales of the Russian bonds on Friday. ·         The activity is maintained in the primary market. Along with corporate issuers municipal lenders enter the market   Comments ·         Among the Russian Eurobonds we still recommend investors to buy Rosneft, not paying special attention to the declined oil production over last three months. Rosneft will grow its assets in the foreseeable to enhance the gains from the oil production. ·         Moody’s downgraded the outlook from stable to negative of Asian-Pacific Bank due to increased pressure on the asset quality and liquidity of the bank operations. Though, the downgrade of Asian-Pacific Bank was expected, but it will affect the quotes of the bank. The bonds of Tinkoff Credit Systems with similar duration are more interesting in this rating category.
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