Kommersant (Moscow), October 20, 2003, 191-p, p.20

The stock market

The stock market has come to a standstill after roaring trading sessions two weeks ago. Right after an announcement about Moody's decision to grant an investment rating to Russia on October 8, trade volumes reached record highs of $1.4bn a day, and last week they dropped to more ordinary volumes of $400m to $500m. Despite a reduction in trade volumes, marketers were buying remaining attractive shares while the USA was celebrating Columbus Day. Russian investors, who have a lot of free ruble resources due to large-scale dollar sales on the domestic currency market, resumed acquisitions on the stock market.

Thursday became another day when the domestic stock market saw a rising trend. The RTS index advanced 1.37 percent on a lower trade volume compared to the previous several days. Blue chips enjoyed rather high demand and Rostelecom became the leader of the rise gaining 5 percent. Oil and gas companies were rocketing too, with Gazprom's ADS surging 4 percent.

This rising trend continued on Friday, and Rostelecom together with Uralsvyazinform were among the leaders of the rise. RBC stocks saw high demand too, and sales of Gazprom's ADS surpassed sales of Gazprom domestically-traded shares by 97 percent due to aggressive purchases of the ADS by foreign investors. By the end of the week, the RTS index was up 3.41 percent to 642.92 points.

Speaking about further developments, we expect some correction in the near future, however, with focus on same companies that in the long run will benefit from the granting of investment rating in Russia. Sberbank, which owns a large volume of sovereign debt obligations, is expected to reap the largest benefit. Gazprom, with a total debt of about $15bn, is expected to benefit from the expected reduction in the refinancing rate. Analysts also predict a higher interest in Gazprom shares prior to the liberalization and reforms of the gas market, scheduled for 2004. YukosSibneft remains the absolute leader among oil stocks. The company's production growth will steadily surpass 10 percent a year over the next five years.

Taking into account inadequately high prices for blue chips and a continuing flow of money to domestic investment funds targeting stocks, one should pay special attention to second-tier stocks. We believe that such companies as RBC, Buryatzoloto and Uralsvyazinform, deserve close attention of investors and they are still underestimated by the market.