MICEX (Moscow) - Russian Stock Market Overview

During this week traders had to keep their both eyes open, because MIXEC index was reasonably fluctuating, having its peak of 632.27, after which plummeted and reached a bottom of 593.47. In a result index closed in a value of 620.73 and in total went up by approximately 4%. The week’s leaders were LUKOIL (LKOH) with an increase by 12% and Severstal (CHMF) which rose by 20.14%. The biggest losers were Novatek (NOTK) with a waist by 19% and Pipe Metallurgical Company JSC (TRMK) that lost 16% of its value.

Severstal (CHMF), Russia’s largest steel maker, experienced a noteworthy increase of 20.14% closing at 2.57 EUR. CHMF saw explosive growth on rising volumes in the first part of the week, peaking at 3.21 EUR on Wednesday, and then lost some of its gains towards the end of the week, probably on the speculators realizing the profits after the good news. The main news, which may have influenced this company’s share price, was purchasing a 61.5% stake in African Iron Ore Group Ltd (AIOG), which through its subsidiaries is entitled to explore the Putu Range area iron ore deposit, situated in Liberia, Western Africa. Severstal will pay 28.07 million EUR for the stake in AIOG, which will be re-named Severstal Liberia Iron Ore Ltd. Putu Range deposit is preliminarily estimated to comprise 500 million tones of iron ore. The further detailed exploration, planned by Severstal Resources, may substantially increase this figure. The Putu Range project is expected to become an important addition to the company’s geographical presence and a strategic location from where the iron ore will be supplied to both Europe and North America.

The index of the Russian oil giant LUKOIL (LKOH) went up this week by 12%, reaching a closing value of 26.68 EUR. This index-number showed up as one of the best during this five trading-days. LUKOIL is the most active Russian oil company overseas and is seeking to stabilize its presence in the downstream segment both domestically and internationally. Already on Monday 8^th the share price started to increase in value, when the rumors were published that Russian oil company is planning to buy a controlling interest in Spain’s Repsol YPF. This acquisition could give LUKOIL a foothold in the European downstream business. LUKOIL may buy a 30% stake in the Spanish company that could mean a full takeover. Repsol’s market capitalization is 16.84 billion EUR, valuing the 30 percent package at about 5 billion EUR. This package LUKOIL is planning to acquire from Sacyr Vallehermoso, which has a 20% controlling interest in Repsol, as well as from bank La Caixa, which has also agreed to sell part of its 12.5% in Repsol, along with other smaller shareholders. For LUKOIL company this deal is a perfect fit. This year it bought a fuel distributor in Turkey for 374 million EUR and 49% of an Italian refinery for 1.27 billion EUR. But the Repsol, unlike its European competitors, derives about half its profit from downstream operations in Latin America and Spain and it partially owns and operates nine refineries. Purchasing this company, LUKOIL will make a step further in its diversification strategy.

Moreover, on December 10^th, Russia's second-largest oil producer has signed a memorandum of understanding with Argentine energy companies, state-controlled Energia Argentina SA, or Enarsa, and Povater SA. Under the three-year memorandum, LUKOIL is to supply oil products such as fuel oil and diesel to Energia Argentina and to use infrastructure belonging to Povater for storage. 

On Thursday December 11^th the Russian oil producer's Vice President Leonid Fedun announced the company's U.S. GAAP-based financial results for the first nine months of 2008, according which the company’s net profit jumped to 8 billion EUR compared to the first nine months of 2007. Furthermore, he assured that LUKOIL does not expect to change its dividend policy in light of the financial crisis. 

The events and announcements concerning LUKOIL, that have taken place during the week, made shareholders more confident about the company and its operating power while the world crisis is going on.

Aeroflot (AFLT), the national airline of Russia, had a decrease of 5.1% this week and closed with a value of 1.15 EUR per share. The share price was going down all the time during the week. The main negative news were that billionaire Alexander Lebedev had offered the government his shares in Aeroflot, the country's largest airline, in exchange for a stake of 25.5% in its smaller rival S7 and 280.65 million EUR of cash. What is more, Lev Koshliakov, Aeroflot's general director of public affairs, said on the 9^th of December that the carrier was budgeting for zero growth next year. These news negatively affected the airline price. Moreover, due to higher jet fuel prices, experts expect Aeroflot to be less profitable in 2008, despite planned ticket price increases of some 8-10% and rising number of passengers.