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Norvik Research 05.06.2017

05/06/2017 17:28

Global developments

Global stocks and commodities are lower amid rising concerns about the strength of global growth and demand. US labour data surprised on the downside: change in nonfarm payrolls in May came out at just +138K against consensus forecast of +182K. The probability that Fed will make a hike on 14 June is still very high at 90.6%. S&P 500 futures are 0.1% lower. Eurostoxx 600 is down 0.2%. The dollar index is 0.2% higher. US 10Y Treasury yields are 2 bps higher at 2.18% after falling 5 bps on Friday. Bloomberg commodity index dropped 0.2%.

Oil prices contracted erasing earlier gains amid diplomatic conflict between Qatar and a group of countries including Saudi Arabia, Bahrain, UAE and Egypt. Baker Hughes rotary rigs number increased by 11 to 733 in the previous week. Brent prices fell 1.3% today to $49.3/bbl after falling 1.3% on Friday.

Russia and CIS area developments and market colour

CBR increased repo haircuts due to liquidity surplus. Binbank’s and Metallinvestbank’s rouble denominated bonds as well as local bonds of a number of other issuers are subject to 60% haircut since 1 June (and 100% haircut since 1 July).

Corporate news

Last week, a number of statements were made regarding a dispute between Rosneft and AFK Sistema on the economic forum in St. Petersburg (SPIEF). Sistema’s president Mikhail Shamolin said that the company is ready for the dialogue with Rosneft on its claims. Earlier Rosneft’s CEO Igor Sechin admitted that out of court settlement was possible. According to Sechin, Rosneft considers many possibilities of how the dispute with Sistema will unfold. Rosneft’s claim currently stands at 170.6 billion roubles ($3.02 billion).

As a result, Sistema rose 10.7% closing at $4.98 per share. Today, the stock keeps rising, trading above $5.0 per share. Sistema’s 2018 Eurobond with a coupon of 6.95% also increased as YTM declined 85.0 bps.

Today, Sistema has published 1Q 2017 financial results. Sales declined 0.6% YoY reaching 163.35 billion roubles, within expectations. Net income contracted 20.8% to 1.579 billion roubles. Sistema reiterates that Rosneft claims are unfounded, and plans to “vigorously” defend its interests by all legal means.

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