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Taking a breather after discouraging US employment

 
10.04.2012

The start to a new trading week was mixed. In the absence of significant news flow, and with London still on holiday, Russian equities finished the day in the black. The most notable headline yesterday was the statement by First Deputy Prime Minister Igor Shuvalov that the privatisation programme could be finalised within 6-8 weeks. While privatisation is a double-edged sword—a positive structural signal, but a supply of equity nevertheless—the timeline for the decision mentioned by Shuvalov suggests that the pace of policymaking once the new government has been formed could well be quite rapid (see story inside). At the stock-specific level, approving the privatisation programme could be of greatest consequence for Transneft, should the government decide to sell below 75% of charter capital (still an hotly disputed issue).

As for the details of the price action on Monday, the broad market saw a mild recovery, with most locally traded equities finishing the day in the black. In contrast, the US traded lines were reacting to Friday’s disappointing US payrolls data, declining in excess of 1%, albeit on a rather thin volumes. The most notable price action was spotted in CEDC (–7.1%, 1.1x 1M average daily trading volume) as investors continued to recognise the looming risks of the alcohol retail market monopolisation. Synergy (–0.5%, 1.8x) was also down on elevated volumes. We continue to highlight that reshaping the alcohol retail market, if it happens, would be hurtful for Food Retailers as well. Otherwise, VimpelCom (– 1.8%, 0.3x) and CTC Media (–2%, 0.4x) were also among the US traded laggards. On the domestic trading front, in the Energy space, Gazprom Neft (+2.6%, 0.1x) saw a better bid after the company approved dividends with an implied yield of 4.8%; in Steels and Bulks, KTK (2.6%, 3.4x) saw profit-taking after a streak of outperformance. Elsewhere, Automakers (–1.7% on average, 0.7x) retreated on Monday, their decent March production stats notwithstanding (see story inside). Overall market activity remained muted, with daily turnover in Russian stocks scoring some USD 1.5bn (0.4x 1M ADTV).

This morning our consumer team has upgraded its 12-month Target Price for Magnit 19% to USD 30/GDR to reflect the updated guidance on improving profitability in 2012 (see Magnit: Trip Notes and Forecasts Fine-Tuned, published this morning). All in all, the improving 2012F profitability fuelled by strong investments in marketing and the supply chain is already priced in by the market and with a 3% upside to our Target Price this is a still Hold.

As we go to print, the Asian stock indices are a mixed bag, but mostly in the red; Nikkei is flat, Sensex +0.2%, but Kospi -0.3% and Shanghai Composite -1.3% following the below expectations March imports stats (+5.3% YoY vs. +9% consensus). Oil (dated Brent) at USD 122/bbl is mostly unchanged compared with the level seen 24 hours ago (having touched USD 121/bbl overnight); Gold is up through 1,650 (+0.8%) on risk aversion crawling back. EUR 1.313, 10Y UST 2.05%, 10Y Bund 1.74%, within striking distance from the 1.67% all-time low recorded last September. The calendar for today is light. Tomorrow is Prime Minister Vladimir Putin’s speech in the State Duma, to be watched for any fresh hints on policy intentions. Otherwise, Alcoa is kicking off the earnings season in the US after the New York close tonight. 

Alexey Zabotkin, Sergey Galkin, Anastasia Markina
VTB Capital analyst

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