Gazprom Leads Worst ADR Slump in Seven Months: Russia
OAO Gazprom (OGZPY) and OAO Mechel (MTL) fell, pushing an index of Russian stocks in New York to the longest run of declines in seven months, as concern the European debt crisis will deepen cut demand for commodities.
Gazprom, Russia’s biggest company and the world’s largest natural gas producer, retreated the most in 2012 while Mechel (MTLR), the country’s biggest producer of coal for steelmakers, sank to the lowest level in three years. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in New York fell for a fifth day, the longest losing streak since Sept. 22.
Oil, the biggest source of export revenue for Russia, fell as much as 2.5 percent as Greece’s struggle to form a new government intensified concern the nation will exit the euro and highten the region’s debt crisis. Russia, the world’s biggest energy exporter and the largest producer of nickel and palladium, got almost 50 percent of budget revenue from oil and gas sales last year. Russian markets are closed for national holiday today.
“There is a concern over global growth and Europe may be heating up again,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone from New York yesterday. “We may revisit the entire Greek bailout process. Those concerns have negative impact on commodities, which have so much weight in Russia.”
The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, retreated 0.7 percent, the most since Jan. 9, to $27.33 in the U.S. yesterday, trimming this year’s advance to 2.6 percent. The RTS (RTSI$) Volatility Index, which measures expected swings in the index futures dropped 4.4 percent to 31.26 points in New York trade.
The Bloomberg Russia-US Equity Index of the most-traded Russian companies in New York lost 1.6 percent to 94.80, the lowest since Jan. 9. The gauge is poised for a 10th week of declines, the longest losing streak since Bloomberg began tracking data.
American depositary receipts of Gazprom lost 5.6 percent to $10.39, the most since Dec. 6. The company’s shares retreated 0.4 percent to 164.94 rubles, or $5.47, on Moscow’s Micex Index. One depositary receipt is equal to two ordinary shares.
Mechel (MTLR) fell 3.7 percent to $7.21 in New York yesterday, the lowest close since July 2009. The Russian stock dropped 1 percent in Moscow yesterday to 217.40 rubles, or the equivalent of $7.21. One ADR is equal to one ordinary share.
Futures expiring in June on the RTS rose 0.7 percent to 142,320 in U.S. trading yesterday.
Crude for June delivery fell 0.9 percent to $97.01 a barrel on the New York Mercantile Exchange. The price has fallen 8.6 percent in a five-day losing streak, the longest since Feb. 2. Brent oil for June settlement dropped 0.4 percent to $112.73 on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, declined 0.3 percent to $110.74.
The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials dropped 0.8 percent to 295.13 yesterday, while the Standard & Poor’s GSCI Spot Index of commodities fell for a fifth day, slipping 0.6 percent to 648.600.
The 30-stock Micex Index (INDEXCF) declined 0.1 percent to 1,384.02 in Moscow, the lowest since Dec. 28. The dollar-denominated RTS index fell 0.5 percent to 1,481.06.
American depositary receipts of OAO Mobile TeleSystems, or MTS, Russia’s biggest cell phone company, retreated 5.5 percent to $17.87 in New York, paring its gain in 2012 to 22 percent.
MTS shares fell after this year’s gain pushed the valuation to 10.1 times estimated earnings, 30 percent more than the multiple for its competitor VimpelCom Ltd, Alfa Bank said.
“MTS has been overpriced for quite some time and it is still expensive compared with VimpelCom,” Iouli Matevossov, a senior analyst in Moscow at Alfa Bank, said by phone from Moscow.
VimpelCom (VIP), which became the world’s sixth-largest wireless operator by subscribers last year after merging with Italy’s Wind Telecom SpA, dropped 1.3 percent to $9.59 in New York yesterday, the lowest since Jan. 4.
Investors also sold shares of MTS in preparation for OAO MegaFon’s initial public offering, Matevossov said.
Russian billionaire Alisher Usmanov, who owns 50 percent stake in MegaFon, the country’s second-biggest cell phone company, said in an April 27 interview with Rossiya-24 state television that the company should prepare for an IPO as soon as possible.
“Megafon’s planned IPO is bad news for MTS, because the two companies compete for the same investors’ money,” said Matevossov, who recommends investors buy VimpelCom shares and hold MTS stock.
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