Russian Trading System Stock Exchange (RTS) 16/04/2012 - 20/04/2012 (week 16) Week 16 turned out to be rather volatile

which should have caused headache to investors. The week started with a sharp 1.93% drop due to unsatisfying governments announcement on Monday that Russia will need to run a budget deficit over several years from now in order to increase the economic growth rate. Afterward, a couple of days without clear trend followed Mondays plunge. The game changer was introduced on Thursday when VTB Bank announced its plan to buy back 83.3 billion shares (app. value $385 million) which were originally sold during IPO in 2007. Market reacted immediately which resulted in 2.12 % RTS index increase in 2 hours. Total index change during the week was rather insignificant (0.1% increase from 1614.89 to 1616.51), although it signals positive expectations that index might get back to its heights in March.

RTS index change during week 16; Source: http://www.tikr.ru/

Considering particular industries, both RTS Oil & Gas index and RTS Metals & Mining index outgrew the benchmark (RTS index) showing significant gains of 1.26 % and 1.39% respectively. Largest contributors were JSC Severstal (CHMFS), Tatneft (TATNS) and Rosneft (ROSNS) which performed growth of accordingly 4.15%, 2.35% and 1.83%. On the contrary, the week was most unfortunate for Gazprom (GAZPS), RusHydro (HYDRS) and Surgutneftegas, Pref (SNGSPS) which resulted in robust decrease by 4.29 %, 3.81% and 3.49% respectively.

The biggest winner of the weak is JSC Severstal (CHMFS), the second largest steelmaker in Russia, mainly operating in steel and mining industries. Trading was relatively vague during the first three days of the week, since investors knew that company is to announce its audited Q4 results of 2011 on Thursday. Apparently, it was worth waiting because net profit reached $463 million and surpassed expectations which were $391 million according to Reuters. Furthermore, company managed to increase the amount of EBITDA ($767 million) which was extremely tough after the major reorganization of its U.S. assets last year. Companys share price rocketed by 5.5 % in Thursday, which was the largest precedent for an overall weekly increase of 4.15%. There might be some signs of correction on Monday, although it is more likely that a new support line will develop and continue unlit new market activities.

JSC Severstal (CHMFS) price index change during week 16; Source: http://www.tikr.ru/

The week turned out to be unfortunate for Russias gas export monopoly - Gazprom (GAZPS); the downtrend initiated in the middle of March continued, as the companys stock price dropped 4.29% throughout the week. Paradoxically the overall sector, according to RTS Oil & Gas Index (RTSOG), had a weekly increase of 1.33%. This indicates that there should mainly be internal reasons behind the drop, which occurred in the beginning of the week. The company might have encountered temporary shocks coming from instable oil demand as well as fluctuating prices; not to mention the impact of extra taxes that are likely to be incurred due to President Vladimir Putins election promises. However, owing to the fact that Europe is becoming more attracted to Russian gas and the tendency for gas prices to rise, in the long run Gazproms earnings should expand. And respective changes in the stock price should follow.

Gazprom (GAZPS) price index change during week 16; Source: http://www.tikr.ru/

The largest bank in Russia and Eastern Europe Sberbank Rossii (SBERS) showed a stable performance and ended the week with 0.39% increase in its common share price. We chose this company in order to portray the situation and changes that might occur in the nearest future. Events discussed here might have a considerable impact on the share price. At the moment, Russian Central Bank holds 57.6% stake in Russia's largest financial institution Sberbank. A package of 7.6% is currently looking for a prospective owner; the offer was delayed for several times in 2011 due to unfavorable economic situation. As planned latter this year, the shares will be privatized by Russia's Deputy Prime Minister Igor Shuvalov. Situation should stabilize once the deal is made. Moreover, on 18th of April Sberbank underwent a capital evaluation. Unfortunately, there is no information published about the outcome. Considering this, the impact will depends on further development. At least for now the situation appears to be quite stable.

Sberbank Rossii (SBERS) price index change during week 16; Source: http://www.tikr.ru/

Even though the major (RTS) index and its subsidiaries (Oil & Gas and Metals & Mining) showed positive increase, the future still looks rather obscurely. Decreasing oil prices negatively affects most of industries and the whole Russian economy. On the other hand, depreciating Ruble increases Russias competitiveness in global market; therefore enlarging net exports, but decreasing the real

gains. Since most of the companies have presented their audited Q4 results of 2011and investors will be waiting for Q1 announcement, so next week might be rather passive, although the positive tendencies from this week might be prolonged. Review by: Tautrimas Lengvinas, Edgaras Marcinkus, Nerijus Ruginis, Kipras Kazlauskas