Russia-focused funds received the biggest inflows on record as investors bet BP Plc’s share swap with state-run OAO Rosneft will attract more money to the world’s largest energy exporter.
Flows into funds reached $724 million in the week to January 19, data compiled by Cambridge, Massachusetts-based research firm EPFR Global show. That’s the most on record and more than triple the $196 million received in the previous week, according to UralSib Financial Corp.
Investors channeled money into funds after BP, Europe’s second-largest oil company, agreed to swap 5 percent of its shares for a 9.5 percent stake in Rosneft on Jan. 14, Chris Weafer, UralSib’s chief strategist, said. The two companies plan to drill in three areas in the Russian Arctic as part of the deal, which lead to U.S. Congressman Edward Markey branding the U.K.-based company “Bolshoi Petroleum”.
“Whatever the criticism of the latest BP investment in Russia from US legislators, investors view the deal as positive and voted with their cash,” Weafer said in an e-mailed note today. Rosneft’s shares have gained 6.3 percent since the deal and closed 2 percent higher at 246.81 rubles at 6:45 p.m. in Moscow.
About $333 million of the $724 million invested into Russian funds went to exchange traded funds, Weafer said. Since late November “almost all new money” invested in Russia was via ETF funds, Weafer said. An increase in money going to mutual funds adds stability to the market and can increase the cash available for share sale issuance, he said.
China funds lost $199 million, Brazil-focused funds saw outflows of $93 million and India funds lost $11 million, according to EPFR. The deal between Rosneft and BP is “finally getting investor’s attention,” Ovanes Oganisian, an analyst at Moscow-based Renaissance Capital, said in a note.
Large inflows have come before a “correction” in the past, Weafer said. In the week to Dec. 5, 2007, Russia received 5 percent of flows, Weafer said. The benchmark Micex Index dropped 14 percent in the next two months, data compiled by Bloomberg show.
The 30-stock Micex gauge gained 0.8 percent to 1,747.39 today, its first advance in four days.
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