Russian energy companies rallied in New York with OAO Lukoil rising to a 12-week high amid speculation the industry will benefit the most from President Vladimir Putin’s troop pullback at the Ukrainian border.
OAO Surgutneftegas (SGTPY) posted the biggest gain in two weeks. OAO Gazprom rose to the highest since January as Putin prepared to visit China this week. The natural-gas producer has rallied 11 percent over the past five sessions in the U.S. as speculation mounted that he will sign a long-term supply deal during the trip. OAO Novatek (NVTK), Russia’s second-biggest natural-gas producer, rose to the highest in a week in London.
Stocks advanced as Putin ordered troops near Ukraine to return to base. The former Soviet republic’s military continued to fight insurgents in the east before a presidential election scheduled for May 25. Russia’s removal of armed forces from border areas eased investors’ concern that it will intervene in Ukraine and trigger harsher sanctions from the U.S. and its allies targeted at the country’s energy industry.
“Russian energy companies, particularly Lukoil, which has been focusing on producing more oil abroad, were facing the most risk in the event of new sanctions,” Ilya Kravets, the New York-based director of investment research at Daniloff Capital LLC, said by phone yesterday. “The overhang seems to be gone for now as there are hopes for solution to the Ukraine crisis.”
Lukoil’s Moscow-listed shares trade at about 4.3 times estimated earnings for the next 12 months. That compares with an average multiple of 12.8 among its global peers, according to data compiled by Bloomberg. Lukoil gained 2.1 percent to $56.40 in New York yesterday, trimming its decline this year to 11 percent. Surgutneftegas increased 2.2 percent to $7.50.
“The de-escalation of the conflict should help market optimism by reducing the geopolitical discount and shifting traders’ attention to valuations,” Slava Breusov, an analyst at Alliance Bernstein LP in New York, wrote in an e-mail yesterday. “It seems Ukraine and Russia have passed the worst point in the crisis.”
Oil and natural gas account for about half of Russia’s budget revenue. Gazprom increased 3.2 percent to $8.66 in New York yesterday on 1.3 times the average trading volume of the past three months.
Putin arrives in China today and is expected to broker a $400 billion natural-gas deal with the country.
The Bloomberg Russia-US Equity Index of the most-traded Russian stocks rose 1.9 percent to 86.53. Futures expiring in June on Moscow’s RTS equity index rose 0.3 percent to 127,210. The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund tracking the nation’s biggest companies, increased 2.1 percent to $24.92.
United Co. Rusal, a Moscow-based aluminum producer, rose 0.9 percent to HK$3.38 at 10:52 a.m. in Hong Kong trading. The MSCI Asia Pacific Index was little changed.
The California State Teachers Retirement System, CalPERS, said in a presentation yesterday that it sold OAO MegaFon and Mail.ru Group Ltd. because it had “information relating to both companies and affiliates of the companies investing in a website” that hosts an anti-gay group. Mail.ru’s VKontakte, Russia’s largest social network, said by e-mail that it blocked the group for U.S. users.
MSCI Inc. reassessed Mail.ru, MegaFon and determined both to be “red flag” companies, which resulted in exclusion of the stocks from internally managed portfolios, CalPERS said in the presentation. The pension fund had a combined total of about $20 million as of June 30 in the companies, according to its annual investment report.
MegaFon gained 1.1 percent while Mail.ru rose 1.1 percent in London yesterday.
OAO Mechel, Russia’s largest producer of coking coal for steelmakers, plunged 1.9 percent to $2.08 and was the only decliner on the Bloomberg-Russia gauge yesterday.
Mechel’s Chief Financial Officer Stanislav Ploschenko will step down. Chief Executive Officer Evgeny Mikhel quit at the end of December. Ploschenko was leading talks between the company and its lenders.