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Stock market posts gains Friday
[June 11, 2006]

Stock market posts gains Friday


(Interfax News Agency Via Thomson Dialog NewsEdge)MOSCOW. June 9 (Interfax) - The Russian stock market posted gains Friday as speculators closed short positions for most stocks after the market plunged in the previous session after a number of central banks increased interest rates.



Benchmark stocks grew 0.8%-4.1% on the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX). The RTS index grew 0.1% to 1362.51 and the MICEX 1.58% to 1191.66.

The market indices lost a respective 11.3% and 12.5% during the week.


The market posted gains after a good close on Wall Street and speculative demand for Russian ADRs in London and New York.

Unified Energy System (UES) (RTS: EESR) grew 4.1% on the MICEX on recent news about energy reform.

Lukoil (RTS: LKOH) rose 0.8% on the MICEX, Rostelecom (RTS: RTKM) increased 3.8%, Sberbank (RTS: SBER) by 3.2%, Tatneft (RTS: TATN) by 3.7% and Gazprom (RTS: GAZP) rose 0.9% to 254.31 rubles.

Surgutneftegas (RTS: SNGS) slipped 0.4% although its preferreds rose 3.7%. MMC Norilsk Nickel (RTS: GMKN) fell 0.8%.

Dealers said the market correction is still part of a
technical
rebound after speculators closed positions at the end of the
week,however there are still no reasons for a market turnaround and sales could soon resume.

The U.S. foreign trade deficit grew to $63.4 billion in April, while it was expected to reach $65 billion, but this not have much of an affect on the market and only fueled some local growth.

The market opened with an upward gap, then some sales appeared in the afternoon, after which the market calmed down as traders waited for the U.S. trade balance, but it didn't have much of an effect, said Anton Kashtanov of Prospekt.

"The situation now looks like it did back in 2000 when our market blindly followed world markets," he told Interfax. "The current growth in world inflation and the accompanying interest rate hikes isn't making investment very attractive on emerging markets, therefore we can expect further sales since Russian players don't have any of their own ideas," he said.

"The U.S. will release the CPI and PPI indices next week
and the
Federal Reserve will decide on interest rates at the end of
June,therefore the entire month will be nervous and highly volatility," Kashtanov said.

The situation with second-tier stocks, where almost no one is trying to support prices, even with small buy lots, is an indicator of the entire market, said Alexei Bachurin of Renaissance Capital.

"It looks like investors are ready to get rid of shares, so we should expect sales to continue. The Rosneft IPO is coming up for which some are probably reserving funds and are selling other securities," he said.

Bank of Moscow (RTS: MMBM) experts said that after five
central
banks raised interest rates on Thursday, there were sales
forsecond-tier stocks, which is a bad sign. A growing number of investors don't believe that the market will see a quick rebound and are closing positions in low-liquid stocks. Investors are becoming more nervous and the market is very sensitive to foreign news, especially U.S. economic statistics.

"Investors are very interested in U.S. inflation statistics that will be published next week," Bank of Moscow's Vladimir Vedeneyev said. "The fate of stock markets will depend on the Fed's decision at the end of June," he said.

Bulls could become more active in the next two and a half
weeks
before the Fed's meeting and try to win back some of the stock
lossesover the past few days, said Dmitry Golubkov of Aton Line.

If this takes place on Western stock markets, there is hope that the Russian market could grow somewhat, but world stock markets will drop after the Fed raises its rate, he said.

There isn't enough of a basis for a strong growth, thus Friday's morning surge can be seen as a short-term rebound, said Andrei Rozhkov of Kapital.

"There is still a potential for a further drop based on worsening trends on world financial markets where central banks - in the Eurozone, India, Turkey, South Korea and South Africa - raised interest rates which could threaten a redistribution of liquidity in favor of the debt bond market, and not the stock market. Furthermore, commodity prices are still falling, which automatically lowers the attractiveness of investing in Russian stocks," he said.

Among second-tier stocks, Avtovaz (RTS: AVAZ) common shares jumped 7.1% and its preferreds by 3.9%, Ritek (RTS: RITK) grew 5.1% and Dalenergo (RTS: DALE) rose 3.5%.

Aeroflot (RTS: AFLT) dropped 7.9%, Megionneftegaz was down 4.8%, Severstal (RTS: CHMF) fell 3.2%, Rosneft-Purneftegaz (RTS: PFGS) by 3% and Sakhalinmorneftegaz (RTS: SKGZ) by 3.6%.

RTS classic market trading was $28.984 million, and trading volume on the MICEX stock section exceeded 42.7 billion rubles, of which about 16.75 billion rubles was for Gazprom. rm RTS$#&: AFLT, AVAZ, CHMF, DALE, EESR, GAZP, GMKN, LKOH, MMBM, PFGS, RITK, RTKM, SBER, SKGZ, SNGS, TATN

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