Yandex Demand Squeeze Taints Moscow Stock-Trading Debut

Photographer: Simon Dawson/Bloomberg

Russia's First Deputy Prime Minister Igor Shuvalov. Close

Russia's First Deputy Prime Minister Igor Shuvalov.

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Photographer: Simon Dawson/Bloomberg

Russia's First Deputy Prime Minister Igor Shuvalov.

Yandex NV (YNDX)’s bizarre first trading day on Moscow’s stock exchange marked a setback for Russia in its bid to get companies to list on the local bourse.

Some traders, who had just one day’s notice that the Internet company would be available on the Russian exchange, said they didn’t have enough time to shift from dollar-denominated positions in New York to the local shares. Others who were ready to buy couldn’t because there wasn’t enough stock available to satisfy demand. The local shares surged, pushing the premium versus the U.S. stock to as much as 36 percent.

The first-day glitch came amid a push by Russia to get local companies to reduce their dependence on overseas exchanges as the country faces international sanctions over its takeover of Ukraine’s southern Crimea region. First Deputy Prime Minister Igor Shuvalov, citing concern about “economic security,” in April urged companies to delist from foreign stock markets.

“This is really embarrassing for the Moscow exchange,” Stanislav Kopylov, who helps manage 45 billion rubles ($1.3 billion) at UralSib Asset Management in Moscow, said by phone yesterday. “Too few shares were offered, and market players immediately bought them all. This discredits the exchange as an organizer of the trade.”

Yandex shares in Moscow rose to as much as 1,546.80 rubles, or $44.16, before closing at 1,170 rubles yesterday. The U.S.- traded stock gained 1.8 percent to $32.98 in its third consecutive advance. The stock retreated 0.7 percent to $32.75 at 10:37 a.m. in New York trading today.

International Sanctions

The Bloomberg index of the most-traded Russian stocks in the U.S. was unchanged at 90.38 after adding 1.2 percent yesterday. The Market Vectors Russia ETF (RSX), the biggest U.S. exchange-traded fund that holds Russian shares, increased 0.3 percent in today’s trading for a fourth day of gains.

Russia has been turning away from the U.S. and Western Europe as President Vladimir Putin’s allies in Russia and Ukraine face sanctions including travel bans and asset freezes. Capital outflows rose to about $55 billion in the first four months of the year, approaching the $63 billion lost in all of 2013, according to comments by central bank Chairman Elvira Nabiullina on May 23.

The bourse followed the established rules when it announced Yandex’s new listing to investors a day before the trading started, Andrey Braginskiy, managing director for communications at OAO Moscow Exchange, said by phone yesterday. “We are very pleased that Yandex shares are now easily available to local Russian investors,” he said.

‘Laughable’ Liquidity

Yandex, which has been planning the Russia listing since the middle of last year, expects the stock to be added to the MSCI Russia Index, Vladimir Isaev, a company spokesman in Moscow, said by e-mail yesterday. The shares’s local trading will increase liquidity as they will be available to some institutional investors that can only buy domestic securities, he said.

Oleg Popov, who helps oversee $1 billion at Allianz Investments, the asset-management arm of Europe’s biggest insurer, said the stock’s premium in Moscow is linked to the lack of liquidity there. “The Russian market is far from being a real market,” Popov said by phone yesterday. “The liquidity is laughable.”

Yandex is most actively traded in New York. The Russian exchange’s one-day notice caused a bottleneck as it gave little time for transactions to be arranged to convert the U.S. stock to ruble-denominated shares available for trading in Moscow, said Alexander Antipov, the head of sales at Veles Capital LLC. Moscow’s time zone is eight hours ahead of New York. No new shares were issued as part of the listing, the company said in a June 3 statement.

Potential Listings

“It’s a shame,” Antipov said by phone from Moscow yesterday. “People simply needed more time to adjust and transfer their shares for sale. High demand for Yandex in Russia was very much predictable.”

Futures contracts on Yandex’s U.S. stock expiring this month fell 0.7 percent to $33.15 in Moscow yesterday. RTS Index futures rose 0.2 percent to 131,190 in U.S. hours.

“It turned out that demand was much higher than expected,” Maxim Klyagin, an analyst at Finam Management in Moscow, said by phone yesterday. The money manager’s owner, ZAO Finam, was the market-maker for Yandex’s Moscow listing.

Yandex dominates Russian Web searches with about 62 percent of the market, more than double that of global leader Google Inc., according to Moscow-based researcher LiveInternet.ru.

Moscow Exchange began talks with Yandex and other companies about local listings in December after reforming its trading infrastructure, Alexander Afanasiev, the bourse’s chief executive officer, said on June 3.

Mail.ru Group Ltd. (MAIL), a Russian operator of social networks and Internet games, said in February it plans to list shares in Moscow in addition to London to attract more investors. Evraz Plc, the Russian mining and metals company part-owned by billionaire Roman Abramovich, is studying the option of listing in Moscow, the company wrote in an e-mail on June 3.

To contact the reporters on this story: Halia Pavliva in New York at hpavliva@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Richard Richtmyer, Matthew Oakley

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