Norvik Research 21.09.2016

21/09/2016 13:21

Global developments

Global equities are rising after BoJ announced modification of its bond-buying program. BoJ refrained from cutting the policy rate deeper into the negative territory while strengthening its control the yield curve. The yen lost 0.2%, Nikkei 225 gained 2.0%, while CSI 300 was up 0.3%.

Japan’s macroeconomic data for August was weaker than expected. Exports declined 9.6% YoY against the forecast of a 4.7% drop, while imports fell 17.3% YoY (against forecast of -16.6%). Machine tool orders declined 8.4% in August after falling 8.4% in July.

The dollar index is flat ahead of today Fed’s policy rate decision. The US 10y yields are flat at 1.69%. S&P futures are 0.4% higher today, while Euro Stoxx is 0.8% higher. Bloomberg commodity index is 0.5% stronger.

Oil prices are rising on positive inventories data. American Petroleum Institute reported that crude oil inventories in the US fell by 7.5 mn bbl (against consensus forecast of a 3 mn bbl build up). Brent prices are up 1.8% at $46.7/bbl. OPEC’s energy minister said that OPEC may turn informal talks into a formal session in a sign of a possible positive outcome of the meeting.

Russia and CIS area developments and market colour

The rouble is 0.4% stronger today to 64.4 against the dollar. OFZ yields are lower 4-12 bp today after widening 9-14 bp in the belly yesterday. Russia and Kazakhstan longer term yields are flat and 2-3 bp tighter respectively today. Ukraine’s longer-dated sovereign yields are little changed with Ukraine 19 yield tightening 7 bp to 7.89%. Azerbaijan-24 and Armenia-25 are 3 bp tighter while Belarus-18 is flat.

Corporate news

Uralkali has completed share buyback program. The program was announced on 18 May, the company bought back 3.35% of its share capital. As a result, free float declined to 5.61% from 8.96% before the start of buyback. We estimate this program cost Uralkali around $280 mn. In our view, the company will buy back the remaining shares from the market, which will continue to weigh on its credit profile.

Severstal will seal off Severnaya coal mine. Operations at the mine were suspended following the accident in February 2016. In 2015, the Severnaya coal mine produced approximately 1.5 million tonnes coking coal concentrate, which is approximately 27% of Vorkutaugol’s overall production of coking coal concentrate in 2015 (5.6 million tonnes). We estimate losses for Severstal on EBITDA level following the closure of mine at $30-40 mn per year (2015 EBITDA of Severstal: $2,048 mn).

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