Updated September 8, 2009

Russia’s stocks are very cheap now after the Friday sale, September, 5, as a result of which the indices lost 8-9%. However, there are no buyers.

On Friday, September, 5, Russia’s stock market capitulated. "We opened the market with the drop of 2%, then it fell to 9%, and then grew to – 4%", as the top-trader of Troika Dialog Timur Nasardinov says. By 15.00 Moscow time, the RTS index updated the minimum since the end of June, 2006, and fell to 1407 points, but it grew to 1469 points (-3,8%) at the closing. The total capitalization of Russia’s public companies went by 3% down, to $1,086 trln.

There was many stop losses and margin calls, because the market was falling by 4-5% within several days, as Mr. Nasardinov says. "We observed this several times since 1997". The managing partner of Da Vinci Capital Oleg Zhelezko is convinced that the depressed mood prevails not only in Russia, since the price for raw materials falls, the dollar goes up, the data on the unemployment in the USA is negative. On Friday, September, 5, the European indices fell by 2,3-2,5%, the Asian – by 2,2-3,3%, MSCI Emerging Markets – by 2%, on Thursday, September, 4, the American indices fell by 3%, and on Friday, Dow Jones added 0,3%. One barrel of WTI oil went by 1,7% down, and settled at $106,2, and metals lost 2-5,4%. Both hedge funds and Russia’s speculators leave the market, as Mr. Zhelezko supposes.

In September, there was found a loophole for the facilities outflow from the hedge funds, and the investors use it actively, as the strategist of Renaissance Capital Ovanes Oganisyan says. The funds were accepting the applications within August, and they understand now, how much they have to sell, and it can take the whole month. According to the data of EPFR Global, the facilities outflow from the funds oriented to Russia continues for three months; and within the period of June, 25-September, 3, the net outflow reached $860 million.

On Friday, September, 5, the "blue chips" were falling by 6-13% at the MICEX, but then recovered. Norilsk Nickel was the outsider (-9,3%). VTB Bank’s stocks fell by 6,9%, to RUR 5,96. The oil stocks, except for Surgutneftegaz (-5,9%), demonstrated good results: Lukoil lost 0,5%, and Rosneft added 0,5%.

The news that Russia’s Ministry of Energy prepares the statements on the reduction of the tax burden, the MET in particular (Mineral Extraction Tax), backed the oil companies’ quotations, as the portfolio manager of Pilgrim Asset Management Olga Izyumova marks.

Investors prefer the most liquid securities, but these buyers don’t stake on the oversold Russia’s market and play short, as Mr. Nasardinov explains the difference.

The thing is that there are little sellers, and there are no buyers at all, as Mr. Zhelezko complains. "If there is no "fresh money", there will not be any growth, and neither western investors nor Russia’s banks have money". On Friday, there was the fifth bottom this year, he says.

It is the second-largest correction for the last 10 years, as the strategist of Alfa Bank Erik Depoi calculated. Since the May maximums, when the RTS index settled at almost 2500 points, it fell by 42%; and it fell by 47% within the correction of August, 29, 2000-January, 3, 2001. When this process ends, the investors will get the unique opportunity of buying stocks at the bottom, if money is left.

The demand should appear at these levels, as Mr. Nasardinov is convinced. "Banks, metallurgical and oil companies are very cheap now". On Friday, September, 5, VTB Bank’s capitalization reached $15,2 billion at the LSE, only 0,8 (P/BV ratio) to the forecasted capital as of the year-end – $17,6 billion. As Mr. Zhelezko considers, people will buy, when several factors will be presented: the political risks should be settled, Russia’s Central Bank should strengthen the ruble, good companies’ indices for 3Q and the reports of the investment banks’ analysts proving that now Russia’s market is the cheapest in the world should be presented as well