Technical correction starts on MICEX stock market

A downward tendency was registered on the MICEX stock market on August 26, 2003, a MICEX expert pointed out. The MICEX index dropped by 1.3 percent to 471.40 points yesterday. The total volume of deals with shares amounted to about 8bn rubles ($263m), which was about the average daily amount this month. Practically all blue chips eased back yesterday. RAO UES lost 0.31 percent, LUKoil was 1.36 percent lower, Surgutneftegas dropped by 3.33 percent and YUKOS went down 2.14 percent.

One of the main factors that provided for yesterday's decrease was the crisis of liquidity in the banking system. Balances at correspondent accounts of credit organizations were 99.7bn rubles ($3.28bn), which was close to the lowest amount this month. Overnight credits on the interbank market exceeded 8 percent. A sharp deficit of liquidity hindered activities of financial organizations on the stock market making some companies and banks sell securities, which resulted in the noticeable decrease in share prices.

The external conjuncture remained rather negative yesterday. The majority of stock indices did not recover from the drop on August 25 and some indices even continued retreating. It seemed that a technical correction had started after a strong gain in the middle of August. Some experts think that it may continue until early September. At the same time world oil prices supported Russian oil stocks. Urals oil prices grew by 0.62 percent to $29.29 per barrel. The approval of the TNK-BP deal was also a positive piece of news for the market. At the same time, these positive factors were not enough to increase share prices.

On the whole, the expert thinks that the situation on the stock market is very similar to the beginning of another technical correction. After a considerable growth in the middle of the month, when the MICEX index approached closely the level of 480 points, share prices started easing back. The current support level is between 455 and 460 points of the MICEX index and the fall below this level is unlikely to happen, the analyst concluded.