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This week RTS index continued its bearish trend and dropped by 3,15% ; however, not so significantly as in previous weeks. The value it closed on Friday is 1968, 97.  Basically, the index was fluctuating around the value of 2000, showing very volatile movements in different directions, with stronger bias to go down. There was controversial information, coming out this week and bringing even more uncertainty to the market. In terms of uncertainty can also be explained the behavior of other world stock exchanges. There was no evident tendency in one or another direction, and when Asian markets closed in plus, American were closing in minus and vice versa. But in general, there is still no much optimism in investors’ decisions and no strong indicators for bulls to overtake bears. The most important piece of news came out on Wednesday, with FRS US decision to cut the interest rate once again, this time by 0.5 points to 3%. Expectations of this action had been already laid in indices’ values before the announcement; therefore markets did not show any strong reaction afterwards. The turnover was really low, just 257047761 EUR what is 20,5% less than week before. Top movers of the week were JSC Gazprom Neft with +7,41% and closing price 3,92 EUR and JSC Centrtelekom with -14,88% and closing price 0,48 EUR. Volatility remained high in most of the stocks, however investors’ activity was low and not all stocks were traded each day.

 

Although oil and gas prices in the world and tendencies for the future were not discussed on the economic forum in Davos, there were pieces of news from inside the country that can be of interest to investors. This week one of the most “productive” companies concerning news was JSC Gazprom (GAZP). It’s share price decreased during the week by 2.42% and the closing price was EUR 8.41. The main news about the company were connected with the company’s plans to start providing gas for the Republic of Burjatiya and Chita district. Previously Gazprom did not provide gas for these regions. The company held a meeting concerning this issue on Friday and the news positively influenced the share price. Another positive piece of information published on Friday was connected with the gas field of Kovytkino. Rosnedra, a state company responsible for licensing mining, removed the limit of 9 billion cubic meters per year from Gazprom, which allows the company to negotiate the price with China, the country to which the gas from the gas field will be sold, until the agreement is reached. Previously the gas field was owned by JSC RUSIA Petroleum (68% of shares of the company are owned by TNK-BP), but because it was not able to extract as much as 9 bill cubic meters the company had to start negotiations on selling the gas field to Gazprom. The demand of gas by China from Russia is estimated at 30-40 bill cubic meters per year, half of which can be extracted from the gas field of Kovytkino. Apart from the news from the gas fields and regions, there were also rumors about the news chairman of Gazprom. It was said that the most probable future chairman of the company is the current prime minister of Russia Viktor Zubkov. If so, the company will remain a strong state owned monopoly with positive perspectives in the future.

 

“Trubnaya Metallurgicheskaya Kompaniya” (TMK; RTS: ТRМК) has promulgated disappointing industrial parameters for 4th quarter and all 2007. Manufacturing volume (648 thousand t) was reduced by 18% comparing with the level of 3rd quarter 2007, taking into account experts’ predictions about volume increase by approximately 4%. However, parameters hardly reflect the real situations and perspectives. Principal cause of low results for 4th quarter of the last year became modernization of capacities of seamless pipes manufacture. Modernization of industrial capacities was made within the limits of TMK expansion plan. New seamless pipes production capacities, predictably, will allow to increase industrial volumes in 2nd half-year 2008 and will work with full volume in 2009. TMK shares are rated as rather reliable tool for investments considering nowadays global markets uncertain situation. At absence of oil prices reduction it is not likely that the large Russian oil-and-gas companies (consumers of TMK production) will cut down geological prospecting and extraction expenses in 2008. Therefore, it is recommended “to buy” TRMK shares, even though share price decreased by 7.18%. Last deal price was EUR 6.11, minimum price during the last week was EUR 6.11, maximum price – EUR 6.40.

 

 

One of this week`s top losers is JSC CenterTelecom:  -14.88%, closing price EUR 0.48. Such a strong decrease is mainly caused by investors`  wish to gain more on stocks of oil and gas companies, whose previously underestimated stock values have been steadily increasing during this week. Such a  disinterest in telecom companies has resulted  in negative trends  on the telecom market itself. Most probably, it will recover soon but nobody knows when exactly this will happen.

 

Another loser of this week is JSC NOVATEK (NVTK):  8.97%, closing price EUR 4.46. As it was mentioned above, the oil and gas sector overall has gained quite good positions on the stock market during the last week but,fortunately or unfortunately,  NOVATEK was something that hauled the results down.

As for the company`s decrease itself, it was actually caused more by the competitors` good performance rather than by any bad news published about NOVATEK. The main rival of the latter is GazProm which managed to increse its stock value by more than 7%. Investors, observing such a trend switched their attenton from NOVATEK making it lose almost 9% of the stock value.

 

But anyway, regardless the results,  NOVATEK performed really well during the week. It has published several news about their activities. On Monday,  January 28 it released the announcement about the acquisition of 20% of shares of the Samara First United Bank. Now NOVATEK`s shareholder JSC Levit is the host of 30.5% of shares of the bank. The day later NOVATEK published their plans regarding the volume of gas and carbohydrate output in 2008. According to that information, the company is going to increase considerably their results, reaching the volume of output equal to 32 billion m3 this year and 44 billion m3 by 2010. Such an augmentation will, most probabaly, increase NOVATEK`s EBITDA by 44% in 2008, which will make it the leader of the growth and development in their particular sphere. Besides the latter 2 pieces of news, NOVATEK released the news about signing a contract about attracting financing  (~676 million EUR) for the company`s development and expansion of production.

In our opinion, NOVATEK  has good potential for recovering and gaining good positions during the following week.

 

© 2007 SSE Riga Investment Fund