Mid-Caps Play Catch-ups as RTS Nears Record High
OREANDA-NEWS. The surge in oil and resilient global markets should feed into another higher open for Russian stocks on September 28. With the added impulse of end-of-quarter window dressing, this should allow the RTS to close in on a new all-time high, Alfa-Bank's report says.
The mid-cap segment of the Russian market finally showed signs of catching up with the recent gains in the blue chips, with the RTS-2 Index rising 1.5% on September 27 to 2,163, or just 1.4% below its all-time high set July 23.
The blue chip heavy RTS Index added just 0.7% to 2,064, while MICEX gained 0.6% to 1,755. The mid-cap standouts were Kirov Factory (+16.6%), Ashinsk Steel (+14.7%), Siberia Telecom (+12.0%), Volga Telecom (+9.4%), NorthwestTelecom (+7.6%) and Uralsvyazinform (+4.2%). Petrochemicals producer Kazanorgsintez also had a good session, rising 5.2%. Surgutneftegaz prefs (+2.0%), Transneft prefs (+1.7%), Sberbank (+1.5%) and Lukoil (+1.3%) recorded more pedestrian gains, while outright decliners included VTB (-2.9%), TGK-5 (-1.8%), Chelyabinsk Zinc (-1.1%) and Norilsk Nickel (-0.6%).
In US ADR trade, Mechel (+4.1%) was the stand out, while the other Russian names were mixed. The top performer in London GDR trade was Evraz, up 5.9%.
After the market opened higher on September 27, the early afternoon release of first half results from VTB temporarily discouraged buying efforts, only to see mixed US economic data and higher Wall Street futures support stocks heading into the close.
On September 28, the local corporate events of note are the EGM at TNK-BP Holding to approve 1H07 dividends (record date – August 14) and the release of 1H07 IFRS results by PIK Group and Cherkizovo Group. US investors will react to the PCE deflator, which is the Fed’s preferred gauge of inflation, as well as the Michigan Consumer Confidence Index.
EPFR Global reports a disappointing inflow to Russia-dedicated funds in the week to September 26 of only $3 mln. However, the very impressive $286 mln inflow to the BRIC category - of which the Russia allocation averages 20-25% - helps offset this weakness. Investors remain wary of earmarking too much money to Russia in particular and are more comfortable hedging their bets more broadly. Overall, the outlook for EM flows remains very strong, with the GEM category seeing a huge inflow of $1.36 bln, Brazil funds increasing by $660 mln, and combined China and Greater China funds expanding by $1.494 bln.
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