Russia 100527 Basic Political Developments

Interfax: Ruble continues to strengthen against dollar, euro

http://www.interfax.com/newsinf.asp?id=167171

MOSCOW. May 27 (Interfax) - The ruble continues to strengthen against the dollar and euro now the mood in the global markets, particularly Asia, and oil prices have picked up.

The dollar was down 25 kopecks to 30.88-31.05 rubles in Tom deals on the Moscow Interbank Currency Exchange (MICEX) in the first few minutes of trading. This was 40 kopecks below today's official rate. This is the first time the dollar has fallen below 31 rubles since May 24.

The euro opened down 25-30 kopecks at 38 rubles/EUR1, which was 50 kopecks below the official rate.

The dual currency basket ($0.55 and EUR 0.45), which fell 39 kopecks yesterday, has risen 30 kopecks to 34.05-34.1 rubles so far today.

Pr

Reuters: UPDATE 1-Russia c.bank eyes supervisory tightening

http://www.reuters.com/article/idUSLDE64P1DN20100526
Wed, May 26 2010

* Wants the right to appoint representatives to any bank

* May adopt stricter rules for M&A

* Analysts do not expect dramatic changes in regulation

(Adds further details, quote)

MOSCOW, May 26 (Reuters) - The Russian central bank proposed on Wednesday to tighten sector regulation in order to fix weak links in the system hit by the crisis, according to a report published on the regulator's website on Wednesday.

The central bank wants the right to appoint special representatives into any bank if needed and is mulling stricter rules for merger and acquisitions as well as capital increases, in line with the latest changes in the global financial landscape.

The central bank has already acquired the right to appoint its special representatives to those banks that received government support during the crisis as Russian authorities want to be sure the funds will work for the economy's recovery.

"It seems reasonable to give the central bank the right to appoint special representatives to any bank regardless of whether it received state support," the report said.

Analysts doubt the regulator is looking to increase pressure on the sector although some regulation tightening looks inescapable for the system made of 1,100 plus banks emerging after the worst crisis since 1998.

"The dramatically tightening is unlikely. The proposed measures do not mean the central bank will appoint its representative into each bank in the country," Leonid Slipchenko at Uralsib Capital said.

"The regulator just wants to be fully prepared for any force majeure," he added.

The central bank also proposed to lower the size of a deal -- which leads to changes in ownership structure in the banking sector -- subject to its approval to 10 percent from current 20 percent. However, the central bank did not unveil any further details. (Reporting by Dmitry Sergeyev; Editing by Mike Nesbit)

Bne: Banks to grab a piece of the privatisation action

http://www.businessneweurope.eu/dispatch_text11737

bne
27 May 2010

The Federation Council passed a bill on Wednesday that aims to help make privatisation more efficient. Among the changes it will introduce is an extension of the term of privatisation plans - currently limited to an annual basis - to three years. The government will also be able to hire banks and other commercial agents to sell government property.

The new legislation will also see government property appraised at market prices, and allow the contribution of state company shares to the capital of joint-stock companies, as well as introducing electronic trading, writes Prime Tass.

The move comes amid the renewed push to attract long-term foreign investment to Russia. A raft of privatisation is in the pipeline, according to plans first unveiled in the autumn of 2009. Since that time, sales of stakes in many state-owned companies have been mooted, although none have yet come to market.

Alfa: Ministry of Economic Development estimates April GDP growth at 5.5% y-o-y, downgrades 1Q10 estimate

http://www.businessneweurope.eu/dispatch_text11737

Alfa Bank

May 27, 2010

According to the Ministry of Economic Development (MED), GDP growth in April was 5.5% y-o-y, while the seasonally adjusted 1Q10 estimate has been downgraded from 0.6% q-o-q to -0.2% q-o-q. The April figure indicates a moderate pick-up from the stagnant 1Q10 and confirm our 5-6% y-o-y growth forecast for 2Q10.

The MEDs downgrade of the 1Q10 figure is not surprising, as it corresponds to the recent downward revision to the y-o-y number from 4.5% y-o-y to 2.9% y-o-y. It confirms our view that Russian economic growth was flat in 1Q10 on a lack of local drivers. In April, however, we saw several signs of improvement, including strong 15.7% y-o-y growth in labor-intensive manufacturing, a decline in unemployment to 8.2%, an acceleration in retail sales to 4.2%, and a pick-up in housing construction by 16.2% y-o-y. All the indicators point to better consumption trends, which we believe will drive the economy this year. Combined with the low-base effect, this will result in faster 2Q10 GDP growth of 5-6% y-o-y. Nevertheless, the low-base effect will be exhausted in 2H10, and while consumption trends are looking up, investment declined 2.3% y-o-y in 4M10 due to record-high real interest rates. We believe that expensive money limits demand for investment, even in an environment of recovering consumer demand. We therefore remain cautious on annual growth and maintain our 3.6% forecast.

Natalia Orlova

VTB Capital: CPI increases 0.1% WoW in the week ending 24 May

http://www.businessneweurope.eu/dispatch_text11737

VTB Capital

27 May 2010

News: Consumer prices rose 0.1% WoW in the week ending 24 May, bringing the YTD inflation to 3.8% (6.8% YTD over the same period in 2009). CPI reached 0.3% MTD compared to 0.6% recorded over the same period last year.

The predominant price drops were recorded in eggs and sugar (-4.1% WoW and -1.7% WoW respectively) while gasoline and vegetable prices rose 0.3% WoW and 1.2% WoW respectively.

Our View: Weekly inflation returned to 0.1% WoW, which was recorded for eight consecutive weeks prior to the week ending 17 May, when prices stayed unchanged. The weekly data suggests May inflation will likely ease to 5.7% YoY from Aprils 6.0% YoY.

Despite inflation still moderating, we stick to our view that the CBR will opt to take a pause in policy softening (keeping the refinancing rate at 8%) at the next meeting (expected this Friday).