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Norvik Research 12.09.2016

12/09/2016 13:28

Global developments

Stock markets globally are in retreat on renewed concerns by investors about near-term tightening of monetary policy in the US. Unexpectedly hawkish comments on Friday by a voting FOMC member Rosengren compounded the disappointment from Thursday’s lack of policy by the ECB. S&P closed 2.5% down on Friday, leading to the worst weekly performance of the benchmark since February. This morning, S&P futures are down a further 0.6%. Most European stock markets are down about 2%. China’s CSI 300 and Nikkei 225 both declined 1.7% The US 10y yields added 1 bp to 1.68% today. The dollar index is down 0.1%. The Bloomberg commodity index is 0.4% lower.

Oil prices corrected lower after a further increase in drilling activity. Baker Hughes rotary rigs data show an increase by 7 to 414 in a week, the highest level since February 2016. Brent prices fell 1.2% today to to $47.5/bbl.

Russia and CIS area developments and market colour

Russia’s goods trade data for July were weaker than expected, mainly on the side of exports. The merchandise trade surplus in July totaled $6.5bn compared to consensus forecast of $7.2bn. USD export values declined 17.5% YoY in July (reflecting lower prices for oil and gas, in particular), while import values fell 4.1% YoY in July after -1.4% YoY in June. The 12-month rolling trade surplus declined by $4bn in June to $100bn in July.

The central bank of Azerbaijan on Friday announced a hike in the key interest rate by 5.5 pts to 15%, effective 14 September. According the CBA, the move reflected the situation with the balance of payments and trends in the FX market. Manat depreciated by 10% since early June. A shift to more formal anti-crisis measures, from informal capital restrictions in recent weeks, reflects the increased pressure on the currency.

The rouble weakened 0.4% today at 65.1 against the dollar. OFZ yields widened 9-15 bp on Friday and are mixed today. Russia and Kazakhstan longer-term bonds are 10-12 bps wider today. Azerbaijan 24 is 5 bp wider at 4.24%.

Corporate news

Fitch has downgraded Global Ports to BB-, outlook negative. The downgrade was driven by a larger than previously expected decline in traffic in H1 2016 and 2% contraction in Russian container market. Fitch also expects leverage to increase to 4.5x by the end of 2016.

Uralkali will issue two local bonds for the total of $800 mn. Each bond will have a nominal value of $1000 with maturity on 21 March 2023. The bonds are issued to replace collateral in the form of Company’s GDR in REPO deals with VTB Capital. The transaction will increase the already high leverage of the company.

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