RTS Futures Rally on Brent as Yandex Surges: Russia Overnight
Russian equity futures rose as Brent crude, the basis for pricing the nation’s export blend, climbed to a five-week high while Yandex NV (YNDX) gained after Bank of America Corp. recommended buying the Internet search engine’s stock.
Futures expiring in September on the dollar-denominated RTS index added 0.5 percent to 138,620 yesterday. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in New York fell 1.5 percent to 90.06 after European Central Bank President Mario Draghi said economic risks remain following rate cuts. OAO Gazprom (OGZPY) declined by the most in two weeks while OAO RusHydro (RSHYY) dropped for the first time in four days. Yandex, the country’s biggest Internet search engine, jumped to the highest level since May 30.
Brent oil, the grade that underpins prices for Russia’s Urals export blend, rose to the highest since May 31 after China reduced interest rates for the second time in a month and as a strike prompted Norway’s largest oil producer to announce it would halt production. Oil, together with natural gas, accounted for about 50 percent of Russia’s budget revenue in 2011, according to government data.
“Sentiment on Russian market has improved due to oil price strength and a much more accommodative stance from global monetary authorities,” Yan Gloukhovski, a trader at Alfa Capital Markets in London, said by phone yesterday. “As positive sentiment returns, we are starting to see the ‘Buy the dip’ mentality coming back.”
The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, fell 1.8 percent to $26.86. The RTS Volatility Index, which measures expected swings in the index futures, fell 1.7 percent to 30.19.
Bank of America recommended investors buy the shares, revising its earlier neutral recommendation on the stock, according to an e-mailed report yesterday. Search advertising per capital will rise to $16 by 2015 in Russia from an estimated $6 in 2011 and has further potential for growth, the bank said.
Yandex’s share of Russia’s Internet searches averaged 60.5 percent over the past four weeks, according to Liveinternet.ru. Searches using Google, the world’s largest Web-search provider, were at 26.4 percent, the data show.
“With Yandex’s leading position unlikely to be challenged by Google in the near-term, the story remains solid with expected strong growth in Russian search ad market,” Mariya Kahn, an analyst at Bank of America in Singapore, wrote in the report.
Rising Profit Margin
Yandex is expected to report a profit margin of 45 percent for the second quarter, compared with 40.5 percent in the first quarter and 42.1 percent in the last quarter of 2011, Kahn said.
Russia’s consumer confidence index rose 1 point to minus 4, the highest since the third quarter of 2008, the Federal Statistics Service in Moscow said in an e-mailed statement yesterday.
Russia’s economy will probably expand as much as 4 percent in 2012, more than the previous forecast of 3.4 percent, as investment and retail sales outpace forecasts, Economy Minister Andrei Belousov said on June 21.
“There are so many factors that support the Russian Internet growth story, including an increase in Internet users throughout the country, strong and further strengthening consumer spending,” Alexei Gogolev, an analyst at JPMorgan Chase & Co. in Moscow said by phone yesterday.
Urals Above $100
Brent oil for August settlement advanced 0.9 percent to $100.70 a barrel on the London-based ICE Futures Europe exchange, the highest settlement since May 31.
A planned lockout of oil workers in Norway will halt the nation’s entire offshore production, Bard Glad Pedersen, a spokesman for Statoil ASA, said by phone yesterday from Oslo. The People’s Bank of China yesterday lowered the benchmark one- year lending rate for a second time in a month.
Urals crude rose 0.7 percent to $100.08 per barrel, exceeding the $100 level for the first time since May 30.
Russia’s Micex declined 0.6 percent to 1,435.76 in Moscow yesterday, trading at 5.3 times analysts’ earnings estimates for member companies, a 48 percent discount compared with 10.2 for Brazil’s Bovespa index. The Shanghai Composite Index trades at 9.7 times estimated earnings and the BSE India Sensitive Index has a ratio of 13.7.
“Russian equities are cheap and valuations are supportive of the market,” Gloukhovski said by phone from London yesterday.
Crude for August delivery fell 0.5 percent to $87.22 a barrel on the New York Mercantile Exchange yesterday. Draghi said there were “downside risks” to the euro-area’s economic outlook after the ECB lowered the main refinancing rate.
American depositary receipts of Gazprom tumbled 3.2 percent in New York to $9.56 yesterday, dropping by the most since June 21 and swelling the discount to Moscow-listed shares by 1.3 percent, the biggest since June 21. The stock fell 1.2 percent to 157.38 rubles or $4.84 in Moscow yesterday. One ADR is equal to two common shares.
OAO RusHydro, Russia’s largest hydropower producer, fell 2 percent to $2.48 in New York trading yesterday, dropping by the the most since June 28. The stock fell 1.9 percent to 82.84 kopeks, or 2.55 U.S. cents. One ADR is equal to 100 common shares.
United Co. Rusal, the world’s largest aluminum producer, was unchanged at HK$4.45 in Hong Kong as of 11:21 a.m. local time. The MSCI Asia Pacific Index dropped 0.5 percent as interest-rate cuts in Europe and China failed to assure investors the moves will be enough to boost economic growth.
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