Yandex (YNDX) NV, trading at its biggest discount to Google Inc. since October, is losing the confidence of investors on concern the Russian search engine will forfeit market share to its U.S. competitor after an antitrust ruling.
Shares of Yandex fell 0.2 percent Jan. 4 to $23.24 on the Nasdaq Composite Index, as Google rallied 2 percent to $737.97. The price gap was the widest since Oct. 17. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian stocks listed in the U.S. added 0.9 percent Jan. 4, extending its weekly advance to 4.5 percent, the most since September.
Yandex, which has more than double the market share of Google in Russia, may come under pressure as the Mountain View, California-based company looks to extend its dominance of the global search sphere after a U.S. Federal Trade Commission probe was closed Jan. 3, according to Piper Jaffray Cos, which follows both stocks. Google’s share of Russian searches grew to 26.4 percent in December, from 25.5 percent a year earlier. Yandex’s increased to 60.6 percent from 60.5 percent.
“Psychologically, that’s why Yandex is down,” Gene Munster, a senior research analyst at Piper Jaffray, who rates both companies the equivalent of buy, said by phone from Minneapolis, Minnesota Jan. 4. “Google gets their FTC issues out of the way, it conceptually means that they’re going to be better positioned to compete in all markets, including Russia.”
The FTC concluded last week after a 20-month investigation that Google was motivated more by wanting to improve its search results and the user’s experience than by a desire to subdue competition, Chairman Jon Leibowitz said. The probe looked at whether Google unfairly disadvantaged competing websites by favoring its own services in search results.
The closing of the investigation shows that “Google’s services are good for users and good for competition,” the U.S. company said in a Jan. 3 blog post. An e-mail to Moscow-based Yandex’s media relations team sent after hours Jan. 5 wasn’t returned.
The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund of Russian shares, added 0.3 percent to $30.57 Jan. 4, boosting its weekly gain to 4 percent. Russia’s Moscow Exchange is closed until Jan. 9 for holidays.
Google, owner of the world’s dominant search engine, may be able to make headway in Russia through mobile phones and its Android operating system, Piper Jaffray’s Munster said. The company plans to devote more attention to mobile devices as its rivalry with Apple Inc. accelerates. Goggle acquired handset maker Motorola Mobility Holdings Inc. for $12.4 billion in May.
“As more and more people do searches on mobile phones, they’re in a good position around that,” Munster said. “Google (GOOG) gained some success last year, but it needs to keep growing.”
The Russia-US measure advanced for a fifth straight week last week, the longest rising streak since July, as crude posted the biggest weekly climb since September. Oil and and natural gas contribute about 50 percent of Russian government revenue.
Crude oil for February delivery rose 0.2 percent to $93.09 a barrel on the New York Mercantile Exchange Jan. 4, capping a weekly advance of 2.5 percent. Oil was down 0.5 percent to $92.61 by 8:45 a.m. in New York.
Brent oil for February settlement dropped 0.7 percent to $111.31 a barrel on the London-based ICE Futures Europe exchange at the end of last week, while Urals crude, Russia’s chief export blend, slid 0.4 percent to $110.78, trimming a weekly gain of 1.4 percent. Urals traded 1.2 percent lower today at $109.51.
“Russia is a cyclical market, and January is the best month for cyclicals, stocks that trade with the economic cycle,” Nicholas Smithie, an emerging-markets strategist at UBS AG in New York, said by phone Jan. 4. “What we have in Russia is a budget that depends on the price of oil, an economy that depends on oil, and we’re in a strong seasonal period for oil demand right now within the northern hemisphere.”
OAO Mechel (MTL), Russia’s largest producer of steelmaking coal, was the biggest gainer on the Russia-US gauge last week, jumping 8.7 percent. The company’s American depositary receipts added 1.7 percent to $7.36 in New York Jan. 4 after Ural-Press-Inform reported that Mechel (MTLR)’s Chelyabinsk Metallurgical Plant (CHMK) unit completed expansion of its wastewater biochemical treatment facility last month, citing unit spokeswoman Yekaterina Doldina.
OAO Gazprom Neft, the oil arm of state-backed natural gas export monopoly OAO Gazprom, led U.S.-traded stocks higher Jan. 4, rising 2.8 percent for a weekly advance of 6.4 percent. Mining company OAO GMK Norilsk Nickel (NILSY) was the worst performer on the index, dropping 0.9 percent to $19.38 and trimming a 3.3 percent weekly advance as metals prices fell.
The S&P GSCI Spot Index of commodities retreated 0.5 percent to 646.71 Jan. 4, the biggest slump in two weeks. The gauge fell a third day today, losing 0.2 percent to 645.52, the lowest level since Dec. 28.
ADRs of Polyus Gold International Ltd. (PLZLY) slipped 0.6 percent to $3.2 in New York Jan. 4 as gold futures for February delivery slid 1.5 percent to settle at $1,648.90 an ounce on the Comex in New York.
Prices for the metal dropped for a sixth straight week, the longest slump since 2004, after minutes from the U.S. Federal Open Market Committee’s meeting Dec. 11 to Dec. 12 showed that policy makers will probably end the bond buying program known as quantitative easing that has fueled gains in global assets.
Polyus, Russia’s largest gold miner, slid 1.5 percent last week. That was the biggest slump since Nov. 16 and made Polyus the lone decliner on the Bloomberg index on a weekly basis. Gold fell 0.5 percent today.
United Co. Rusal (486), the world’s largest aluminum producer, climbed 1.2 percent to HK$5.05 in Hong Kong trading today, the highest close since May 8.
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