OAO Gazprom and OAO Lukoil’s U.S.- traded shares are fetching a discount to their Moscow stock for the first time in three years after oil tumbled faster in New York than in London.
Gazprom, Russia’s biggest company and the world’s largest natural gas producer, retreated 1.5 percent yesterday to trade at a 1.3 percent discount, while oil producer Lukoil fell 2.3 percent to trade 0.4 percent lower than the Moscow shares. The Bloomberg Russia-US Equity Index of the most-traded Russian companies declined to a five-month low. Internet company Yandex NV led gains before Facebook Inc. shares start trading tomorrow.
Oil, Russia’s major export earner, fell to the lowest level in more than six months in New York yesterday, extending a 9.8 percent slide over the past month, as U.S. supplies grew to the most since 1990. Brent oil for June settlement lost 5.9 percent during the same period in London as concerns the European Union will ban crude imports from Iran in July cushioned the decline.
“Both Gazprom and Lukoil, Russian energy stocks overall, are very sensitive to crude oil price,” Alexei Kokin, chief analyst for energy companies at UralSib Financial Corp, said by phone from Moscow, commenting on Russian stocks traded in U.S. “They move together with oil price and when oil falls those stocks sometimes fall even more than oil does.”
The Bloomberg Russia index lost 0.9 percent to 88.52 yesterday, the lowest since Dec. 19. Futures expiring in June on Russia’s RTS Index dropped 0.8 percent to 135,170 in U.S. trading. The Russia-US Index trades at 5.7 times estimated earnings, about a 40 percent discount to the 9.8 valuation for the average company on the MSCI Emerging Markets Index and the 9.3 multiple for stocks on Brazil’s Bovespa benchmark.
‘Time to Buy’
Gazprom declined 1.5 percent to $9.30 in New York yesterday, sending valuations to 2.9 times estimated earnings, less than half the 6.2 average multiple for energy companies on the MSCI Emerging Markets index. The Moscow-based company’s stock fell 1.5 percent to 146.08 rubles, or $4.71, on the Micex yesterday. One Gazprom ADR is equal to two ordinary shares.
Lukoil, the country’s second-biggest oil producer behind OAO Rosneft, retreated 2.3 percent to $53.29 yesterday in New York, the lowest since Dec. 30. The decline pushed valuation to 3.8 times estimated earnings, an almost 40 percent discount to the average multiple for energy companies on the MSCI measure. Lukoil fell 1.7 percent to 1,657.90 rubles, or $53.48, on Russia’s Micex Index.
Gazprom and Lukoil ADRs traded over the past week at a discount to the Moscow shares for the first time since November 2008, according to data compiled by Bloomberg.
“It’s time to buy, as Russian companies are extremely cheap,” Ivan Mazalov, director of Prosperity Capital Management, which manages about $4 billion in assets, said by phone from Moscow yesterday. “Investors get frightened because of European problems and the Greek political crisis. Russia is so cheap compared to other emerging markets.”
Stocks and commodities fell yesterday as talks to form a coalition government in Greece collapsed, raising concern that Europe’s debt crisis will worsen.
Russia’s capital outflows reached $42 billion in the first four months of this year, central bank Chairman Sergey Ignatiev told lawmakers yesterday in the State Duma, the lower house of parliament, citing preliminary data.
The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, retreated 0.4 percent to $25.62, the lowest since Oct. 5. The RTS Volatility Index, which measures expected swings in futures, fell 0.2 percent to 36.68 points.
Crude oil for June delivery dropped 1.2 percent, to $92.81 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 2. Prices have fallen 15 percent since closing at the 2012 high of $109.77 a barrel on Feb. 24.
New York crude “is trading at a discount to both Brent and Urals, which are very close to each other, because of the dynamics particular to the US storage of oil,” Ilya Kravets, an analyst at ED Capital LLC in New York, which manages $100 million including Russian equities, said by e-mail yesterday.
Brent oil for June settlement slipped 0.5 percent to $111.71 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, fell 1.5 percent to $108.49 a barrel.
Polyus Gold International Ltd., Russia’s biggest gold producer, dropped 4.1 percent to $2.60, the lowest level since July 27.
Gold futures for June delivery fell 1.3 percent to settle at $1,536.60 on the Comex yesterday. Gold has slid 19 percent from a record close of $1,891.90 reached on Aug. 22, about 1 percentage point shy of a bear market in New York.
Yandex NV, the owner of Russia’s most-used search engine, rose 3.3 percent to $22.18, pushing valuations to 27 times estimated earnings, compared with 14 for Google Inc.
Facebook’s shares are set to price today and begin trading under the symbol FB on the Nasdaq Stock Market tomorrow.
The world’s most popular social network’s initial public offering is fueling investors’ appetite for Yandex, Iouli Matevossov, a senior analyst at Alfa Bank said.
“Facebook IPO warms it up for Yandex,” Matevossov said on May 14 by phone from Moscow. He recommends investors hold Yandex shares, with a price target at $27.
The 30-stock Micex Index lost 0.7 percent to 1,335.10 in Moscow yesterday, the lowest since Oct. 6. The dollar-denominated RTS index fell 0.3 percent to 1,369.40, the lowest this year.