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. Last Updated: 07/27/2016

RTS Up 1%, Gloomy Q4 Seen

Shares saw their first gains in a week Thursday, but traders dourly predicted there was little chance the market would see any marked growth for the rest of the year.

The benchmark RTS index edged up 1 percent to close at 175.9 on weak turnover of $8.7 million.

Unlike other global indices, which have been slowly rebounding since Sept. 11, the RTS remains far below the 207 level reached on the eve of the terrorist attacks.

The RTS has slid 2.5 percent over the past week in unenthusiastic trading.

Traders said shares would most likely stay depressed throughout the fourth quarter.

?Today and tomorrow the mood is optimistic, but it won?t stay long as all markets will be highly volatile in the short run,? said Igor Losavio, head of sales at the Prospekt brokerage.

The optimism was sparked by recent gains in both oil prices and U.S. stocks.

However, news of a midair explosion of a Sibir passenger jet over the Black Sea late Thursday could stoke market jitters.

Also, oil stocks may face volatility following an announcement Thursday by the U.S. Energy Information Administration that it expects a sharp drop in global oil demand over the next six months.

Still, analysts point out, Russia is in relatively better economic shape than other emerging markets. The political situation is more stable than in years past, while the fiscal situation and balance of payments are strong despite the recent plummet in oil prices.

The overwhelming concern battering Russian shares is the price of oil, which remains weak despite recent gains.

?Those who believe that low and/or volatile oil prices will not adversely affect Russian assets do so at their own peril,? Troika Dialog said in a recent research note.

Other stock watchers were more optimistic.

?The situation on the oil market remains unstable but not hopeless,? said Gennady Krassovsky, an oil analyst at NIKoil.

The government has presented parliament with a draft 2002 budget that fixes the average oil price for next year at $23 a barrel, a couple of dollars more than current Urals blend prices.

But the budget ?would remain credible even if Urals dips to average $15 per barrel, due in large part to past surpluses, which would be carried forward,? Troika Dialog said.

The good news, traders say, is that Russian assets are undervalued and have both fundamental value and growth potential. Thus, the stock market could outperform other global markets once the dust settles after the attacks.

?If the attacks did not occur, we would expect the RTS index to reach 200 to 250 points by the end of 2001,? said James Fenkner, chief strategist at Troika Dialog. ?Now I will be very happy if we stop at 200.?

Stephen O?Sullivan, head of research at United Financial Group, said he expected the RTS to trade within a band of 170 to 210 during the fourth quarter. The level is 10 percent less than UFG forecast before Sept. 11.

?What we really need is new investors,? O?Sullivan said, adding, ?This is unlikely to happen by the end of this year.?

Krassovsky from NIKoil predicted oil prices would stabilize at about $25 a barrel by year-end.