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Russia Stocks Rally Most Among Emerging Markets as Gazprom Gains

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Oct. 8 (Bloomberg) -- Russian stocks advanced for a fourth day, climbing the most among 19 emerging markets, as rising crude boosted appetite for oil and gas producers’ shares.

The Micex Index added 1.7 percent to 1,505.14 by the close in Moscow, the highest since Feb. 20. OAO Gazprom, the natural-gas export monopoly, jumped 2.7 percent to 151.15 rubles, the strongest since October 2012. OAO Lukoil, Russia’s second-largest oil producer, gained 1.7 percent to 2,102 rubles, the highest since July 2008. Oil and gas shares led the advance among nine sector groups, rising 1.8 percent on average.

Crude oil increased 0.4 percent to $103.48 in New York. Russia receives about half of its budget revenue from the oil and natural-gas industries. Most metals gained in London, while Standard & Poor’s GSCI Commodities Index rose 0.4 percent. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the index trading at 4.4 times projected 12-month earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.

“Oil is lifting the Russian market, which is particularly cheap compared with global peers,” Vadim Bit-Avragim, who helps manage about $4.4 billion at Kapital Asset Management in Moscow, said by phone. “Oil and gas stocks are feeling good in this environment.”

Novatek Profit

OAO Novatek increased 1.7 percent to 393.50 rubles, while its London securities traded up 1.6 percent at $137.10, the highest since April 2012.

Net income at Russia’s second-biggest natural gas producer will double over the next three years on earnings from its crude oil business and dividend streams from joint ventures, analysts at Sberbank CIB said today in an e-mailed note. They raised the price estimate for its global depositary receipts to $188. Sberbank’s other best long-term investment stocks include Eurasia Drilling Co. Ltd, OAO Bashneft, OAO Surgutneftegas’ preferred shares and OAO Gazprom Neft, they said.

“Oil is trading at comfortable levels for Russia,” Yuri Selyandin, a portfolio manager who helps manage about $2 billion at GHP Group in Moscow, said by phone. “Our market is one of the most undervalued.”

Gazprom jumped 3.3 percent to $9.375 in London, the highest since March 15. Lukoil added 2.2 percent to $65.40 in London.

Ten-day price swings on the Micex increased to 15.329 from 13.565 yesterday. The dollar-denominated RTS Index gained 1.9 percent to 1,471.65.

OAO Magnitogorsk Iron & Steel jumped 1.9 percent to 8.10 rubles. OAO Mechel rose 1.2 percent to 103.80 rubles.

With U.S. borrowing authority set to lapse Oct. 17, President Barack Obama reiterated that he won’t negotiate with Republicans over raising the debt limit or reopening the government. Senate Democrats are planning a test vote before the end of this week on a measure that would grant Obama authority to raise the $16.7 trillion debt ceiling, probably for a year unless two-thirds of both chambers of Congress disapprove.

“Investors still believe that U.S. officials will find a solution in time,” Selyandin said.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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