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. Last Updated: 07/27/2016

T-Bill Hype Sends Stocks to Post-Crisis Highs




Russian equities pulled back Friday from a surprising four-day rally earlier this week, closing down 3.5 percent for the day at the end of a five-day period that saw the highest volumes since last August's economic collapse.


Analysts and traders attributed the increase in volumes, which averaged just above $7 million per day, to speculation over an expected decision by the Central Bank on allowing foreigners to buy stocks with proceeds from the restructuring of the debt market. In January, by way of comparison, daily volumes averaged $1.5 million.


"This is just a bubble," said one Moscow trader who spoke on condition of anonymity. Most people talked to on Friday seemed to agree, saying the movement was due to little other than expectations of an influx of money into the equity market.


"It's very straightforward," said Roland Nash, chief economist for MFK Renaissance. "This ispurely speculation driven."


The MT Index ended Friday at 47.17, down 1.71 points, but up 8.48 points on the week.


A decision on the repatriation schemes is likely next week. Finance Minister Mikhail Zadornov said his ministry would announce its scheme in full next week, while the Central Bank has said it will make its decision on the debt restructuring in a week to 10 days.


Proposals mooted by the Finance Ministry would see the accounts used by foreign investors to invest in state debt - known as S accounts - converted to three new accounts, one of which would allow stock purchases.


One trader said most of the week's activity had been driven by heavy buys placed by one or more large overseas investors. "There's been a big global asset management firm that's been buying $30 million to $50 million in [American Depositary Receipts] in London," said Dan Rapoport, head of trading at CentreInvest Securities.


Rapoport said the main activity had been in five so-called "blue chips": Unified Energy Systems, Mosenergo, LUKoil, Surgutneftegaz and Mostelecom. He said Irkutskenergo and Tatneft shares also saw some movement.


He expressed some optimism over Friday's results, saying that there appeared to be more support for the market than he had expected.


"We anticipated the market would correct much deeper today, but it didn't," he said.


The market's dismal performance for the last year has brought out the cynical side of some of the people in Moscow's investment banks. In its daily report, MFK Renaissance wrote that by Thursday morning the RTS was "now up 21.3 percent since the end of last week, putting it, amazingly enough, in the best performing global stock market position so far in 1999, albeit on volume rivaling the Namibian and Uruguayan exchanges."