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Norvik Research 08.11.2016

08/11/2016 17:03

Global developments

Markets are little changed ahead of today’s US presidential elections, after yesterday’s spike in risk appetite. S&P futures are down 0.2% after yesterday’s 2.2% rally. CSI is 0.4% higher while Nikkei 225 is marginally lower. Euro Stoxx 600 is flat. The dollar index is 0.1% weaker, having advanced 0.7% yesterday. 10-year US treasury yields fell 1 bp today to 1.82%. Gold is up 0.2%.

China’s trade data came out weaker than expected. Exports in dollar value terms declined 7.3% YoY in October against consensus forecast of -6.0% YoY while imports fell 1.4% YoY against the forecast of -1.0% YoY.

Oil prices are lower today ahead of US inventories data. Crude stocks are projected to have risen 1.5 mn bbl in the previous week. Brent prices are down 0.5% today at $45.9/bbl.

Russia and CIS area developments and market colour

Ukraine’s stock of gross external reserves declined marginally in October. According to preliminary data, reserves totalled $15.5bn as of 1 November, compared to $15.6bn as of 1 October. Net FX interventions (purchases) by the NBU in the amount of $275mn and gross domestic debt issuance in FX ($154mn) were offset by debt payments of $366mn. This was the first decline in FX reserves since March. Reserves account for 3.7 months of imports.

RUBUSD is 0.3% weaker at 63.8. OFZ yields are 1-4 bps tighter today. Russia and Kazakhstan longer-term sovereigns are 5-7 bps tighter. Ukraine sovereign yields are 6-12 bps tighter.

Corporate news

The government has agreed terms of privatization of its 19.5% stake in Rosneft. Reports in the local media citing a government decree suggest that the minimum price for the stake will be set on the basis of the recent high in the company’s share price reached on 11 October (RUB 748.3bn) adjusted for a 5% discount (RUB 711bn or $11.1bn at current exchange rates). The transaction should close by 5 December with settlement due by 15 December and final transfers to the budget by 31 December. First Deputy CBR Governor Yudaeva earlier today stated that the transaction should not have a strong impact on RUB even though specific financing arrangements remain uncertain. In absence of a strategic investor, at least part of the financing is set to come from either sale or pledge of FX assets of domestic oil companies (primarily Rosneft itself). This points to support for RUB from privatization-related flows up to mid-December.

Gazprombank will be recapitalized by Gazprom for RUB 85bn. This was disclosed in the documents accompanying the bank’s Eurobond roadshow.

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