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. Last Updated: 07/27/2016

Exhausted Stock Market Slips in Mild Correction

Exhausted after its furious New Year's rally, the Russian stock market slipped this week in a light correction on relatively low volumes, traders said.

The dollar-adjusted Moscow Times Index closed Friday at 196.16, down 3.03 percent for the week. The ruble index lost 2.80 percent to 498.74.

As demand from foreign investors that fueled the rally cooled, Russian investors switching from government treasury bills to corporate shares picked up the slack.

"The planned volume of investing in Russia this year will go up 25 percent since 1996," said Dmitry Yevenko, head of the equity trading department at United City Bank. "We will see more interest from Russian investors this year. A lot of new money on the market will boost shares to a new trading level. Only a major political perturbation could crash the market."

Overheated blue chips fell an average of 4 percent during the week.

Mosenergo lost 8 percent early Friday to $1.390, on the news of a lower than expected 1997 profits forecast, and closed at $1.460, down 6.4 percent for the week.

Unified Energy Systems closed Friday at $0.155, down 1.6 percent for the week. LUKoil closed down 5.5 percent, at $14.27.

Gazprom, a market leader, firmed to $0.470 Friday from $0.457 Thursday, with $4.6 million traded after the company announced the planned issue of new American Depository Receipts.

The regional utility Irkutskenergo was up 2.6 percent for the week, to $0.282, after its ADRs were launched last Friday.

The leading telecommunications company Rostelecom, which closed Friday up 4.5 percent, at $3.46, was also strong following a positive recommendation from Flemings Securities. However, a prominent trader said Rostelecom stock has peaked and has no potential for more gains.

Investors did not pay much attention to the oil sector this week. Shares in oil companies were down an average of 10 percent. Purneftegaz shares fell after a Moscow arbitration court ruled that Rosneft would keep the oil production unit sought by Sidanko. Purneftegaz closed Friday at $3.50, down 12.5 percent for the week.

"Second-tier utilities and telecoms attract investors, while the blue chips are slowing down," said Renaissance Capital trader Oleg Tatkov. "It looks like last autumn when the blue chips market was flat, and investors jumped to grab second-tier shares. But now they do it more carefully."