Russian Daily Monitor

Gazprom appoints new Sibneft CEO

Gazprom has started to find its feet in its new oil business. On Tuesday
Gazprom CEO Alexei Miller appointed Alexander Ryazanov, his deputy
responsible for strategy, gas processing and marketing as the new CEO of
Sibneft. The company\'s Board of Directors is to meet next week to ratify
the appointment.

South Telecom announces new debt

South Telecom reported Tuesday that it intends to place RUB 5 bn in bonds,
to mature in four years. The company needs the new debt issue to
substitute short-term debt with long-term. The step should also help to
decrease the cost of the company
,s debt (the current debt issues cost
South Telecom more than 12%). However, the operator
,s debt level remains
excessive: in 2004, the debt to EBITDA ratio was 5.73.

Money market

Figures for September PPI and foreign demand for U.S. securities in August
came in notably higher than expected in data released Tuesday. The dollar
supportive news weighed the euro down to USD 1.192, pushing the dollar
,s
value on the local market up to RUB 28.65.
We see the resistance level of USD 1.19 to the euro as too strong to be
broken on regular dollar buoyant newsflow, which continues to reinforce
expectations of rising interest rates. Thus, the most likely scenario
appears to be the stabilization of the dollar at its current level, with
rising probability of some short-term correction on the downside. Another
factor backing a moderate dollar
,s slippage, at least against the rouble,
is the short-term rise of FX currency supply, although the extent of such
a move would be bounded by currency basket rule.

Eurobonds

The recent statement from U.S. Federal Reserve chairman Alan Greenspan
that the current surge in energy price threatens to slow the economy
sparked speculation that the Fed may be considering the option of a pause
in its rate tightening. The move may look more probable in light of
September CPI data, with core-inflation to be the upper bound of Fed
,s
comfort zone. However PPI figures released Tuesday pointed to the building
of inflationary pressure on core consumer prices, which would require
further interest rate hikes. We still think the current series of interest
rate hikes has not ended. However this does not mean that U.S. Treasuries
will show yield expansion in the short-term, particularly at the long end
of the curve. Long-term inflation expectations remain contained and demand
for U.S. securities is still strong, as evidenced by Tuesday
,s release of
net U.S. security purchases.
While it is too early to say that investors
, sentiment in emerging markets
is starting to recover after the recent sell-off, Russian sovereign papers
advanced on Tuesday for the second straight day. Unlike other emerging
markets, the Russian sovereign credit spread contracted Tuesday to fall 7
bps on the day to 115 bps. The yield of Russia
,30 lost 9 bps to hit 5.63%.

Equity market

Tuesday saw declines in equity indexes in both developed markets and their
GEM counterparts due to concerns about tightening monetary policy in the
United States. Oil prices suffered from eroding demand and optimism
stemming from good weather conditions in the Gulf of Mexico: the
indicative Brent price declined 0.6% to USD 58.9/bbl. That said, we see no
support for the Russian equity market, which will likely see decline on
Wednesday after feeble attempts to grow in the previous two days.
On Tuesday, the Russian market added only 0.3% d-o-d, although investor
sentiment was cheerful at the beginning of trade. There was demand for oil
and gas papers with Lukoil gaining 1.69% and Gazprom
,s local shares and
ADSs adding 1.15% and 2.05%, respectively. Lebedyanski should be noticed,
as it jumped 7% on ridiculous volumes. ADR trading in New York was
negative for Russian names, and most papers closed in the red.