Contact Center Solutions Industry News

[May 20, 2006]

RTS Index falls below 1500 on foreign pressure

(Interfax News Agency Via Thomson Dialog NewsEdge)MOSCOW. May 18 (Interfax) - The benchmark RTS stock market index fell below 1,500 points on a drop on world stock exchanges, falling oil prices and Western sales in London and New York on Thursday.

Sales picked up on Wednesday's U.S. inflation data that increased the likelihood that the Federal Reserve would continue to raise its key rate and after OPEC said it expected a drop in demand for oil for the first time in the past three years.

Benchmark stocks fell 2.1%-4.4% on the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX) to their level of early April. The RTS index fell 3.41% to 1,490.64 - after dropping to 1,477.55 in the morning - and the MICEX was down 2.63% to 1,308.48.

Prices for Russian ADRs in London and New York fell 0.2%-6% on Thursday.

Dealers said the closing of long blue chip positions has caused the deep negative trend on world commodity and stock markets, which suggests that bears will stay in control. The RTS Index could find its next support at 1,450 points.

The market should correct up after such a plunge, said Alexei Bachurin of Renaissance Capital.

"After the drop on Wall Street and for oil, there was panic on the Russian market in the morning and the stop-loss and margin call signals started working, and a lot of sales began," he told Interfax.

"However, when positions are cut in such volume, a
cutting-off
takes place and a market closes in the plus. There aren't
any
fundamental reasons for a drop in the Russian market and it's
mostlikely psychological. Some funds have closed positions, but there is still a surplus of money on the market and this is fueling new buys of cheaper stocks," he said.

Aggressive sales ended Thursday afternoon and the market calmed down somewhat, however it is still nervous because of its uncertain future movement, said Alexander Zakharov of Uralsib (RTS: USBN).

"Those funds that sold shares and left in cash and not now
in any
hurry to buy up cheaper stocks, because client bids could come
frommaturing mutual funds," he told Interfax.

"There isn't much market support in this situation and no one
knows
what the reaction of investors will be. If they have a
negative
reaction, the market could slide further over the next few
days. Ifinvestors don't pull out money, but put it in counting on attractive prices, we will see a good rebound," he said.

This is why U.S. economic data is so important to the
market,
Zakharov said. U.S. GDP will be released on May 25 and the
minutes of
the Federal Reserve meeting of May 10 will be released on May
31, hesaid. "Commodities and stock markets are tied to each other right now quite tightly. Everything is an instrument for speculation and if something provokes a market slide, oil will follow, or oil will start falling first, then shares will slide in its wake. I don't think there will be continued growth over the next one to two weeks," Zakharov said.

Many people are going to start talking about a break in the upward market trend soon, although there aren't any reasons for a global drop, said Alexander Baranov of Nord Capital.

"Fundamentally, everything is good with us and there aren't any reasons for a turnaround. Russian exports are high, industrial output is growing, as are the gold and foreign currency reserves, and inflation is at least under control" he said.

"There is a reason for profit taking at least, which
players are
doing as they gradually close long positions, but since
they areprofitable, it's still a long way to panic. Taking loss positions will start once the RTS Index falls below its lows after its deep correction in March," Baranov said.

"Investment euphoria is ending on the market and it is starting a long-term sideways trend," he said. "Investors will now gradually form new positions. The most painless way to do this is at a level under 1,350 points on the RTS," he said.

The RTS tried to hit 1,500 on Thursday, which is relatively strong technical support, although testing it opens new horizons for a drop, said Yury Sedykh of the Russian Development Bank.

Players are far from panicking and current prices are attractive for buys, although every day the drop is killing hope for a quick market rebound, he said. Investors are waiting for the end to the correction after a growth, and some kind of downward recoil, he said.

"It looks like traders are adapting to the fall. Every
day the
market is opening with a downward gap, but there is no panic,"
saidAndrei Vernikov of Aton Line.

"Prices for the most liquid stocks have tumbled an average of
12%-
14% over the past week, but you can't say that the bears are
ready tomake the market collapse. The market couldn't end on a high note because of the need to close the margin call on long positions," he said.

Unified Energy System (UES) (RTS: EESR) dropped 4.4% on the MICEX, Lukoil (RTS: LKOH) fell 2.1% to 2,146 rubles a share, Rostelecom (RTS: RTKM) was down 2.2%, Surgutneftegas (RTS: SNGS) -4%, MMC Norilsk Nickel (RTS: GMKN) - 3.2%, Tatneft (RTS: TATN) - 3.8%, while Sberbank (RTS: SBER) of Russia edged up 0.2%.

Gazprom fell 2.9% to 284 rubles a share on the St. Petersburg Stock Exchange, with 18.539 million shares changing hands. It fell 3% to 283.5 rubles on the MICEX, with 99.385 million shares changing hands and 3.6% to $10.45 on the RTS.

Among second-tier stocks, Dalenergo (RTS: DALE) common shares grew 3.6% and its preferreds by 3.1%. Yakutskenergo (RTS: YAEN) plunged 5.4%, CenterTelecom (RTS: ESMO) dropped 4.4% and Avtovaz (RTS: AVAZ) preferreds were down 3.6%.

RTS classic market trading was $78.359 million, of which $49.37 million was for Gazprom, and trading volume on the MICEX stock section was 61.251 billion rubles, of which 28.27 .22 billion rubles was for Gazprom. rm RTS$#&: AVAZ, DALE, EESR, ESMO, GAZP, GMKN, LKOH, RTKM, SBER, SNGS, TATN, USBN, YAEN

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