Update maxima

Morning background for Russia's stock market turned out to very positive. Thus, the U.S. stock market peaked for the year against the backdrop of strong corporate reporting, recovery in metals prices and the weak dollar. Stock markets in Asia also rose on Tuesday after Australia's central bank announced a further increase in interest rates as economic growth accelerates. In particular, the Australian ASX200 added 1,11%, the Korean KOSPI rose by 0,611%, while the Chinese Shanghai Composite added 1,52%.

However, the greatest support to the domestic market had quotes for black gold that are updated yearly highs. Price per barrel of Brent during the day reached $ 78.18, which in turn enabled the MICEX index to update the annual maximum and reach 1388 points. However, neither the oil nor the index is not able to consolidate the achieved levels and in the second half of the day went into the negative zone. In general, it is worth noting that the growth of oil, as well as domestic exchanges are growing mainly in the excess liquidity, breaking away from fundamental value. This in particular can be judged by the multiplier P /E, which currently is at record levels. In my opinion, this growth will not last long, and very soon we will witness a sharp correction, caused by the end of the reporting season and the lack of market-supporting flow positive.

interesting news from the second tier may be noted the statement, vice president of finance and corporate management of AvtoVAZ Oleg Lobanov that against the company not excluded in the bankruptcy case scenario, if you can not restructure its debt. Currently, AvtoVAZ plans to offer the market a bond issue for 50 billion rubles (about $ 1,7 billion), or to negotiate extension of credit with bank creditors. Total company requires 38 billion rubles. to restructure debt and 12 billion rubles. for working capital. We certainly appreciate this news as negative. The introduction of bankruptcy proceedings in respect of AvtoVAZ as a measure of protection from creditors may also lead to a sharp decrease in the value of the company. In addition, the conditions necessary to attract large amounts of funding looks increasingly likely scenario is an additional issue of shares, bringing the share of minority shareholders may be significantly reduced. We also note the high debt load the company, resulting in the decline of the car market for more than 50% and the interest rate in 17,5-19,0% AvtoVAZ receives billions in losses, which results in 2009 could exceed 30 billion rubles. (about $ 1 billion). In light of the dire financial condition and high uncertainty about the additional issue of shares and offering price, we do not recommend buying shares of AvtoVAZ.

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