Yandex NV (YNDX) and CTC Media Inc. (CTCM), this year’s best-performing Russian stocks traded in the U.S., will keep rallying in 2014 as the consumer industry weathers an economic slowdown better than commodity producers, according to Kapital Asset Management LLC.
Yandex, Russia’s biggest Internet company, soared 98 percent this year while CTC Media, the only publicly-traded Russian television company, gained 72 percent. OAO Mechel and OAO Gazprom each slumped more than 12 percent as the S&P GSCI index of 24 raw-material prices was on pace for the first annual decline since 2008. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York added 3.6 percent in December, extending this year’s advance to 2.4 percent.
While the world’s biggest energy-exporting economy is posting its weakest annual expansion since 2009, the pace of retail sales growth has surprised economists as unemployment fell and real wages grew.
“Investors will continue to buy consumer stocks next year because that’s where we’re seeing growth,” Vadim Bit-Avragim, who helps oversee about 160 billion rubles ($4.9 billion) at Kapital Asset Management in Moscow, said in a telephone interview. “With the oversupply of commodities, we’re unlikely to see growth in that sector next year.”
While the 4.5 percent growth in retail sales in November is lower than the 16.5 percent six years earlier, it topped the 3.3 percent median forecast of 17 economists in a Bloomberg survey.
Yandex’s third-quarter revenue exceeded analysts’ estimates, helped by online ads after the company extended its text-based advertising service to Mail.ru Group Ltd. (MAIL) During the same period, CTC Media’s net income climbed 77 percent, also beating analyst estimates.
“Yandex is my pick number one for next year, if traffic and content growth continue,” Bit-Avragim said. “I’m also positive on CTC because of the ad sales and audience growth.”
American depositary receipts of Mechel, Russia’s largest producer of coal for steelmakers, tumbled 65 percent this year. The company reported its biggest nine-month loss in at least a decade on Dec. 23, joining global mining companies including BHP Billiton Ltd. and Rio Tinto Group in reporting writedowns after slumping metal prices eroded profits. Mechel (MTLR), which has $2 billion of debt due next year, is the most-indebted Russian company after United Co. Rusal.
Gazprom, Russia’s biggest natural-gas producer, has slumped 13 percent so far this year in New York. The Moscow-based company expects its dividend to miss analyst estimates by about 25 percent as output stalls, according to a document obtained by Bloomberg News.
“Demand for commodities has dropped, sinking many Russian companies since our economy is strongly tied to the production and transportation of commodities,” Oleg Popov, who manages $1 billion of securities for Allianz Investments, said by phone from Moscow.
The Bloomberg Russia-US gauge rose 2.2 percent to 101.65 last week, led by Yandex. The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, fell 0.4 percent to $28.53. The benchmark Micex Index climbed 0.3 percent to 1,498.58 by 10:21 a.m. in Moscow today. The RTS Volatility Index, which measures expected swings in the index futures, rose 3.2 percent to 17.09 today.
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