Market Watch November 25: Some good, some bad, and some just plain left field
In the wake of a strong rally overnight on Wall Street after the U.S. Government unveiled plans to bail out Citigroup, Asian investors stepped up to the plate in a mood to buy. Tokyo posted a 5.2% gain with exporters and carmakers having a rare recent day out. Hong Kong added 3.38% with energy stocks gaining on the back of a sharp overnight rise in crude prices, and Sydney added 5.8% with financials up on the Citigroup news and resources stocks up on a spike in metals and commodity prices.
This set the scene for a positive opening in Moscow where the dollar denominated RTS jumped out of the box with vigour to add an almost immediate 5% gain before regaining its breath around lunchtime and then climbing in afternoon trade to close at 692.51 up 10.82%. The Rouble denominated Micex, however, was more sluggish off the mark, built up more moderately through afternoon trade, and then gave up its gains in the final 45 minutes of trade, after the RTS had closed, to end the day 1.61% lower at 595.15. The Micex is considerably larger in terms of trade volumes, and is open for an extra 45 minutes each day, and, of course, they are denominated in different currencies. But they are trading in the same city, with many of the same companies, and the differences between them can sometimes be completely mystifying – in addition to a 10% difference between the indices on Tuesday, investors in NLMK, for example, would have noted that on the Micex they closed 15.58% higher, while on the RTS they lost 14.94%. Investors can only hope that talks aimed at bringing them together come to a successful conclusion, which can only bring greater clarity, and an improved perception of the world of Russian equities.
After climbing nearly 10% in Monday trade crude prices remained firm in Asian trade before easing from there on in, ahead of the release of this weeks U.S. inventory data, with continued interest in OPEC’s next move lent some weight by Russian energy Minister Sergei Shmatko, who acknowledged that Russia may coordinate production cuts with the oil cartel. Despite this, crude prices gave up most of the ground gained the previous day, with Brent spot prices back under $50BBL and Nymex Light Sweet futures and the WTI spot hanging on for dear life just above that landmark. This meant that Russian energy plays spent much of the day catching up with an overnight rise in crude and then the rest of the day giving some or all of it back. That left Rosneft (up 10.99% on the Micex at close) leading the field, with Surgutneftegaz (up 5.94%) and GazpromNeft (up 3.29%) also on the upside, with Lukoil (down 1.72%) and Ritek (down 3.79%) better prepared for the next sell off. The world of gas smelled much better for investors with Gazprom (up 3.04%) and Novatek (up 1.89%) higher.
Metals and commodities had a similarly up and down day. No sooner had Russian traders got to work and digested the news that commodity prices were up in Asia, than out of Melbourne Australia came the news that BHP Billiton was giving up on its pursuit of Rio Tinto. This instantly led to the valuation of almost every other metals and commodity play being trashed, now that the largest resources company in the world was no longer prepared to pay a significant premium to eat the second largest. Here in Russia there was some positive news from the sector with a truce called in the long running Norilsk Nickel management and ownership imbroglio, with Messrs Potanin and Deripaska committing themselves to generating some shareholder value. That saw Norilsk (up 3.45% on the Micex at close) get some traction, while Polymetal (down 2%) limited the downside. Polyus Gold added 13.42% in a sort of delayed reaction to the recent oomph in gold prices, while the latter eased during the day. Coalminer, Raspadskaya, shed another 4.6% but steelmakers NLMK (up 15.58% on the Micex at close – notwithstanding its RTS result, but in line too with the 13.3% climb of its GDRs in London), Severstal (up 12.87%) and MMK (up 1.3% after its sharp climb on Monday) were on song.
Russian banks had a generally sedate days trade with the big state owned banks Sberbank (down 1.13% on the Micex at close) and VTB (up 1.52%) breaking both sides of the starting mark, while smaller private rivals Rosbank (up 4.65%) and Bank Moskvy (up 4.51%) got more traction and Bank Vozrozhdenie (down 2.25%) trailed the field. In the retail and consumer products field, Sedmoi Kontinent (down 11.47%) wilted before another investor pummelling, while Magnit (up 1.6%) sailed serenely on, and Lebedansky (down 0.27%) and Wimm Bill Dann (down 2.05%) eased lower, along with Kalina (down 4.65%). Also down was agricultural play Razgulay (down 1.6%), along with IT services provider Armada (down 4.97%), while property developer PIK Group added more than 33% after its recent horror stretch.
Elsewhere automakers Avtovaz (down 4.1% on the Micex at close) and Sollers (up 3.85%) took different turns, while Kamaz (down 4.7%) gave reverse gear another try. Smaller telecoms Center Telecom (down 8.64%), Dalsvyaz (down 4.2%) and Sibirtelecom (down 4.47%) suffered, while Volga Telecom (up 2.8%) somehow escaped unscathed.
In Europe the news of the day was dominated by BHP Billiton's decision to walk away from its takeover bid for rival Rio Tinto. This had an immediate effect on almost all resources stocks which moved lower, while BHP headed North. In London a topsy turvy day saw the FTSE 100 add 0.44% with Standard Chartered’s rights issue looking better than it did when it was announced, and Rio Tinto investors freed from fending off unwanted takeovers but worrying about debt. The Dax added 0.13% with Volkswagen getting a 22% mauling, and in Paris the Cac 40 added 1.18% as big banks enjoyed favour.
Across the Atlantic worse than expected 3Q GDP data and evidence of still plummeting house prices couldn’t restrain the Dow after the Federal Reserve pulled a further $800 Billion from behind the ear of the credit markets to buy mortgage backed securities and have another go at unfreezing credit markets. At the close the Dow was up 0.43% with the Nasdaq down 0.5%.