Aton - Daily Dashboard - Aug 9, 2010.
The RTS finished the week at 1,509, down 0.5% on Thursday's close. Uncertainties remain over the economic situation in the US, how the ongoing drought in Russia may impact inflation levels in the country, and whether Kazakhstan and Ukraine may follow Russia's example in restricting grain exports. That said, the Russian government announced at the end of last week that it will reassess a resumption of grain exports after the current harvest, which should ease concerns over Russia's commitments to existing contracts. This week, the weather conditions are likely to continue to dictate how fertiliser stocks may perform, while food producers will probably receive attention from investors today after the Russian government said on Saturday that it could not lift the ban on US meat imports to Russia until the United States complied with Russia's poultry import standards.
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GLOBAL MARKETS: PERFORMANCE AND THEMES
The US labour market was again at the forefront of investors' minds at the close of last week as government data released on Friday revealed a decline in July payrolls that far exceeded the market's expectations; the S&P 500 finished the day 0.37% lower. Less risky assets benefited as equities suffered from the weak economic statistics, with the yield on the 10-year US Treasury note dropping to 2.824%. Gold was also a popular option on Friday, helping bullion break through the $1,200/ounce level. Looking to this week, US consumer names will likely be under further scrutiny as investors assess the impact of the poor job market figures on consumer spending, which makes up some two-thirds of the US economy. That said, in spite of Friday's dash for safer assets, markets seem to continue to cheer expectation-beating corporate results, most notably in Europe. Last week, strong earnings from European banking and insurance companies, including HSBC, BNP Paribas and Lloyds Banking Group, lifted some of the downward pressure on markets following the US economic data release. European fertiliser producers also outperformed on Friday, namely Yara and K+S AG, on the back of Russia's ban on grain exports, which is supporting wheat prices.
Best performing sectors: Utilities, Consumer Staples; Worst performing sectors: Consumer Discretionary, Materials.
EMERGING MARKETS: PERFORMANCE AND THEMES
Most markets in emerging Asia are down this morning, with the exception of Chinese stocks which remain marginally in positive territory at the time of writing. With the Chinese renminbi linked to the dollar, the continued strengthening of the yen against the greenback is supporting Chinese exporters given that Japan remains a key export market for China. On Friday, financials and developers in China rebounded as local regulators moved to calm market fears over the parameters outlined in the government stress tests for the country's banks, including a potential collapse of up to 60% in property prices. The regulators emphasised that the stress tests do not represent the state's market forecast. Meanwhile, in Brazil, the Bovespa Index moved 0.4% lower on concerns that a poor economic climate in the US will have negative ramifications for Latin America's exports. That said, it appears that Brazil's own economic outlook is generally perceived to be fairly sound, which may limit the decline in share prices.
Polyus Gold Increases 1H10 Gold Production by 5% YoY
Polyus Gold released 1H10 operating figures on Friday (6 Aug). Total gold production for the period was 503,000 oz, up 5% YoY. This growth was largely the result of boosts to output at the Titimukhta deposit and the Blagodatnoye deposit (Krasnoyarsk region), which contributed 39,000 oz and 80,000 oz of gold, to production respectively.
Production at Olimpiada, which was 233,000 oz of metal (-32% YoY), was in our view expectedly weak due to a lower volume of ore processing and a lower recovery rate as the company processed only sulphide ore at Olimpiada in 1H10.
Production at Kuranakh (Republic of Sakha) was also down 24% YoY to 56,000 oz, on the back of a decline in the amount of ore milled and a lower ore grade, though we had not anticipated this negative result. Production at KazakhGold was 46,000 oz.
We view Polyus Gold's 1H10 operating results as neutral for the stock and expect a stronger 2H as the company is further ramping up output at Titimukhta and Blagodatnoye as well as improving processing capacities at Kuranakh.
At the same time, there is a risk to production following the freezing of Kazakhaltyn's bank accounts, an operational subsidiary of KazakhGold, as part of legal actions initiated by the Kazakh Agency for Economic and Corruption-Related Crimes against KazakhGold. In the worst-case scenario, if KazakhGold's production is suspended until YE10, Polyus Gold's annual output may be some 50,000 oz, or around 3% short, of our current expectations.
Severstal Claims Two More Bank Deposits from IIB
Vedomosti reports today (9 Aug) that the Moscow Arbitration Court has registered two claims by Severstal against International Industrial Bank to return two of the former's bank deposits amounting to RUB2.2bn ($73mn).
In July of this year, Severstal filed its first claim in the same court against IIB to return its term deposit amounting to RUB1.8bn ($60mn), which IIB is overdue in returning.
In our view, Severstal is taking legal action against IIB in order to strengthen its position in negotiations over the sale of IIB's Yenisey Industrial Company, which has the right to develop the vast Elegest coal deposit (Tuva region). Evraz and NLMK have also shown interest in developing the Elegest coal deposit, according to media reports.
We believe that IIB's overdue deposits to Severstal may provide the latter with certain leverage in tenders for the licence to develop the Elegest coal deposit, or at least mean that Severstal can participate as one of the pool of investors that will develop the deposit.
Aton OOO (LLC)
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|Publication:||Russian Banks and Brokers Reports|
|Date:||Aug 9, 2010|
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