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. Last Updated: 07/27/2016

G-8, Eurobond Spark Blue-Chip Rally

Moscow brokers expecting a slow summer got a surprise this week as investors started buying blue-chip shares on a wave of good vibes from the G-8 conference in Denver and a successful $2 billion Eurobond issue.


But the market cooled by Friday and some traders foresaw more corrections.


The Moscow Times dollar-adjusted index of 50 leading shares closed up 6.52 percent for the week at 316.02, bringing its total gains since the beginning of the year to 107.36 percent. Twenty-seven issues posted gains, 18 declined and 5 were unchanged.


"The market was just overheated," said Alexei Dolgikh, senior trader at Troika Dialog. "Everybody was expecting a calm, quiet summer."


Traders attributed the rally to positive news at the Group of Seven leading industrialized nations' conference in Denver last weekend, including Russia's acceptance to the Paris Club as a creditor, and to a heavily oversubscribed issue of dollar-denominated Eurobonds.


Buying focused mainly on blue-chip shares, driving volumes on the Russian Trading System to a record $94.3 million and pushing price-to-earnings ratios up to 17.7 for LUKOIL and 26.3 for the Moscow City Telephone Network.


Dolgikh said the high prices prompted foreign investors to ease their buying while Russian investors turned to profit-taking. The result was a downward swing in the market by week's end.


"Right now I would cut exposure to blue chips," said Renaissance Capital trader Dmitry Kryukov. "I wouldn't be surprised if we saw a 6 to 8 percent correction over the next couple of weeks."


The Nizhny Tagilsk Metal Factory led the pack, posting gains of 27.08 percent to close Friday at $0.153.


Unified Energy Systems held up longer than others after the company publicized strong first quarter profits Thursday, though it ended the week with a relatively meager 8.96 percent gain. The energy giant reported pretax profits of 369 billion rubles ($63.8 million) and announced plans to issue American Depositary Receipts this summer and convertible bonds by the fall.