Page 79 - IFR Opportunities in Russian capital markets

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ifrintelligence reports/Opportunities in: Russian Capital Markets
Table 3.27: RTS rallies, year-end and new year, 2000 – 05 (%)
December, %
December - mid January, %
Jan-Feb as % of full year return
2000 2001 2002 2003 2004 2005
1.1 20.2 14.8 29.1 –0.6 –4.3
6.9 15.2 0.5 4.7 6.3 26.5
Source: RTS, DataStream
Table 3.28: RTS returns, 1997 – 2007 (%)
RTS index
Jan-Feb* %
Year %
1997 65.5 1998 –22.9 1999 27.9 2000 1.8 2001 17.8 2002 13.6 2003 4.1 2004 15.8 2005 9.6 2006 30.2 Average ** – 2007 0.6
97.9 66.9 –85.2 26.9 197.4 14.1 –18.2 N.M
81.5 21.8 38.1 35.7 58.0 7.1
8.3 190.4 83.3 11.5 70.7 42.7
– 28.4 ? –
*2007 data as of February 23, 2007 **Excluding 2000 and 2004 Source: Bloomberg
Seasonal factors
None of the investment banks has satisfactorily explained the reason for this behaviour, although it seems likely that as the same phenomena have been noted in other markets in the West it is related to factors such as holidays, and the need to close positions to book profits ahead of quarterly performance checks is the reason. And in Russia the weather and the long holidays exaggerate this phenomenon.
The Russian Orthodox Church still celebrates Christmas and New Year according to the Julian and not the Gregorian calendar: Christmas falls on 7 January and New Year on 13 January. Russia has normal working days on 24 and 25 December. Moreover, Easter is a far more important religious festival for Orthodox believers than Christmas, which is a bit of a non-event in Russia, so the impact of the Easter holidays is much larger.
The holidays and weather have a profound impact on Russia's work rhythm. Typically, the entire country comes to halt on 31 December as Russians celebrate the ‘New New Year’, and business does not really get going again until the start of February, after the Orthodox ‘Old New Year’. Many Russians choose to leave for a hot holiday in January and very little work happens in the first month of the year.
The next big holidays are in May, running from May Day through to 8 May (International Women's Day, Russia's answer to St Valentine's Day), when the country takes another universal break to welcome in spring.
Finally, work stops again in July and most of August as Russian schoolchildren are given a three- month summer holiday to make the most of the warmth and families decamp to the ‘dacha’ or country house that all Russians have.
The country starts up again on 1 September, the day all the schools reopen, which is also about the time when the market starts its end-of-year rally.
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