Russia Stocks Jump as Gazprom Rallies, Putin Urges Investment

Russian equities rallied to a 2 1/2-month high as the nation’s biggest natural-gas producers OAO Gazprom and OAO Novatek climbed.

The 50-stock Micex Index gained 0.6 percent to 1,488.22 by the close in Moscow after dropping 0.7 percent earlier. Gazprom, Russia’s natural-gas export monopoly, erased earlier declines, rising 1.6 percent. Novatek increased as much as 1.5 percent. OAO Dixy Group, a Russian supermarket chain, surged as much as 10 percent as revenue rose 17.5 percent last month.

Gazprom’s board approved 2013 investments at 705.4 billion rubles ($22.9 billion), less than this year’s investment program of 975 billion rubles. The company has the largest weighting on the index at 14.6 percent. Novatek climbed after Kommersant reported Russia’s Energy, Finance and Natural Resources ministries, as well as the Federal Antimonopoly Service support the company’s bid to end Gazprom’s liquefied natural gas export monopoly. Novatek has the seventh-largest weighting on the index at 3.9 percent.

“For investors, it’s really important that Gazprom spend less,” Alexei Kokin, an analyst at UralSib Capital, said by phone from Moscow. “One of the main concerns investors have is that all of Gazprom’s money goes to their new projects, that there isn’t enough free cash flow.”

The amount of Gazprom shares traded was 52.7 million, equivalent to 1.6 times the three-month average. Novatek increased 0.5 percent to 346.47 rubles. Oil and gas stocks rose

0.9 percent on average, the most of all industry groups.

Putin, TNK-BP

“This is very positive news for Novatek,” Mark Rubinstein, head of research at IFC Metropol, said by phone. “Currently Novatek exports LNG through Gazprom and has to pay them a fee, while this would allow them to save on export expenses.”

Novatek applied to the government to exempt LNG from Gazprom’s monopoly and the ministry will respond to the request by the end of the year, Energy Minister Alexander Novak said at a Moscow gas conference on Nov. 20.

OAO Rosneft, Russia’s largest oil producer, dropped 0.3 percent to 261.68 rubles. OAO TNK-BP Holding retreated 2.3 percent to 56.42 rubles. The Russian government is in talks with billionaire partners in the TNK-BP oil venture about investing all or some of proceeds from the sale of their half of the company in Russia, President Vladimir Putin told reporters in Moscow today.

BP Plc and AAR, which represents the U.K. explorer’s billionaire partners in the venture, signed separate binding agreements this year to sell their halves of it to Rosneft.

Offshore Zones

Russia should seek agreements with offshore zones to compel disclosure of tax information and help reveal the main beneficiaries of companies, Putin said. The nation also needs to refine its legislation to better safeguard the interests of business owners and improve Russia’s investment climate, he said.

Russian capital outflow in 2012 is seen at between $65 billion and $67 billion, Central Bank Chairman Sergei Ignatiev told reporters in Moscow on Dec. 19.

VTB Group, Russia’s second biggest lender, retreated 0.9 percent to 5.43 kopeks after rising as much as 0.8 percent ealier. The amount of shares traded was 39 billion, equivalent to 1.2 times the three-month average. The bank may sell new shares next year, chief financial officer Herbert Moos told reporters today.

Net income attributable to shareholders rose to 23.4 billion rubles ($760 million) for the three months through Sept. 30, from 20.4 billion rubles a year earlier, Moscow-based VTB said today in a statement. That beat an average estimate of 19.7 billion rubles from 15 analysts surveyed by the lender.

Khodorkovsky Sentence

The Bloomberg Russia-US stocks gauge declined 0.9 percent to 97.82 yesterday, trimming its advance this year to 8 percent. The Market Vectors Russia ETF, the biggest U.S. exchange traded fund that holds Russian shares, dropped 0.8 percent to $29.61, while the RTS Volatility Index gained 1.6 percent to 21.08 points.

Oil slid as much as 0.8 percent to $89.26 a barrel in New York. Russia receives about half of its budget revenue from oil and natural gas sales. The country’s markets are closed for New Year and Christmas holidays in the first week of 2013.

The amount of shares traded on the Micex was 47 percent above the 10-day average, according to data compiled by Bloomberg.

Standard & Poor’s GSCI Index dropped 0.5 percent to 641.58. The RTS Index rose 0.8 percent to 1,528.89.

Mikhail Khodorkovsky, once Russia’s richest man, will be freed from prison in 2014 after his second sentence for fraud and tax evasion was reduced by two years.

Lowest Valuations

A Moscow court cut the former Yukos Oil Co. billionaire’s sentence to 11 years from 13 years. Today’s decision may be appealed to the Supreme Court, Anna Usacheva, a spokeswoman for the Moscow City court, said by text message.

Russian stocks extended their gains as the U.S. economy grew at a 3.1 percent annual rate in the third quarter, greater than the highest forecast in a Bloomberg survey, according to Commerce Department data released today.

The Micex trades at about 5.4 times estimated earnings after adding 6.1 percent this year. That compares with a multiple of 10.7 times for the MSCI Emerging Markets Index, which has gained 14.8 percent.

Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.

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