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Norvik Research 30.09.2016

30/09/2016 14:44

Global developments

Global stocks tumbled amid growing concerns about the health of European banking system. Deutsche Bank's share price reached fresh historic lows as some counterparties reduced their exposure. Euro Stoxx 600 is down 1.0%. S&P futures are lower 0.2% after the index closed 0.9% down yesterday. Nikkei 225 fell 1.5% while China’s CSI 300 was 0.3% higher. The dollar index is up 0.2% today, US 10y yields are down 2 bps at 1.54%. Bloomberg commodity index declined 0.3%.

Oil prices retreated following the euphoria after OPEC’s unexpected decision late on Wednesday. Brent prices declined 1.7% to $48.4/bbl after rising about 7% since Tuesday’s close.

Russia and CIS area developments and market colour

Former Finance Minister Kudrin has called at a business Breakfast in Sochi for delaying implementation of President Putin’s May 2013 directives calling for increasing real wages by 50% by 2018. Kudrin believes that ineffective social and military expenditures should be cut for the sake of boosting spendings on education, healthcare and infrastructure. He also urged for an increase in minimum pension age and additional support for regional budgets (he expects regional budget revenues will decline 19-20% in real terms by 2019).

The rouble is 0.4% weaker at 63.3 against the dollar. OFZ yields widened 1-6 bps today after coming down 2-7 bps yesterday. CIS Eurobonds are weaker today. Russia and Kazakhstan longer-dated yields are 3 and 1 bp wider today respectively. Ukraine yields are 0-2 wider, Azerbaijan-24 is flat while Armenia-25 and Belarus-18 are 2 and 3 bps higher respectively.

Corporate news

The final yield target for the new 4-year Russian Railways Eurobond is 3.5% +/- 5 bps. The issue was oversubscribed 8-fold as demand exceeded $4 bn versus $500 mn offer size. The funds will be used to finance buyback of existing bonds with maturities in 2017 and 2018. The placement of the issue is yet another evidence of strong appetite of global investors for Russia's credit risk. We expect more issues to come by the end of the year, which reduces refinancing risks for the corporate segment of the market in 2017-2018.

VTB increased its share in TMK to 13.44% from 7.34% at the end of 2015. TMK sold shares for RUB 10bn to VTB at the end of 2015, although the size of the stake was not disclosed at the time of sale. The funds from share sale were used to repay debt. According to TMK’s website, as of 19th September TMK Steel Holding owned by TMK’s majority shareholder Dmitry Pumpyansky controlled 65.05% of share capital.

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