Russian shares swung between gains and losses before the Federal Reserve ends its two-day policy meeting and as OAO Gazprom fell after offering Ukraine lower gas prices in a deal championed by President Vladimir Putin.
The Micex Index (INDEXCF) was little changed at 1,478.89 by 4:33 p.m. in Moscow after rising as much as 0.3 percent and falling 0.1 percent. Gazprom, the nation’s biggest company, dropped 0.6 percent to 137.73 rubles. AFK Sistema climbed 2.5 percent.
Under an agreement signed between the chiefs of Gazprom and Ukraine’s state energy company NAK Naftogaz Ukrainy, the price of Russian gas will be cut to $268.50 per 1,000 cubic meters from about $400,Putin said yesterday. About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted that the U.S. central bank will decide to reduce its $85 billion monthly bond-buying program after European markets close today.
“The Fed clearly has reasons to start curbing stimulus, if we look at the main economic indicators, but doing it sharply is complicated and dangerous,” Kirill Yankovskiy, director for equity sales at UralSib Securities in London, said by e-mail. “There’s a big chance that the Fed will leave tapering until next year.”
After weeks of starts and stops in negotiations, Putin and his Ukrainian counterpart Viktor Yanukovych agreed yesterday to a deal that could help the country avoid a default after its foreign reserves sank to a seven-year low. In addition to the Gazprom fuel discount, Putin pledged to buy $15 billion of Ukrainian debt, triggering a record rally in the country’s short-term notes.
Hours after the deal was announced yesterday, UBS AG lowered its forecast for Gazprom’s earnings in 2014 by 6 percent, saying it doesn’t expect Russia to compensate the company for the discount.
OAO Bashneft gained 2.1 percent to 1,980 rubles, while its preferred shares dropped 1.7 percent to 1,424.80 rubles. Sistema proposed transfering 20.2% of Bashneft’s ordinary shares held by Sistema-Invest to the oil company, according to an e-mailed statement today from Sistema.
Investors who do not vote or oppose the reorganization will be offered 1,983 rubles per ordinary share and 1,403 rubles per preferred share in a buyback. Sistema advanced 2.4 percent to $32 in London.
Moscow-based builder PIK Group (PIKK) gained 3.7 percent to 70 rubles and 5.1 percent to $2.135 in London. Billionaire Alexander Mamut and Sergey Gordeev are set to buy 16 percent and 20 percent, respectively, from billionaire Suleiman Kerimov’s Nafta Moskva, Vedomosti reported yesterday, citing people familiar with the deal it didn’t name.
The dollar-denominated RTS Index (RTSI$) in Moscow was steady at 1,415.85. Russian equities have the cheapest valuations among 21 emerging-market economies monitored by Bloomberg, with shares on the benchmark trading at 4.2 times projected 12-month earnings compared with a multiple of 10.4 for the MSCI Emerging Markets Index.
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