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Micex Jumps Most in Month as Mechel Rallies After 41% Tumble

Nov. 14 (Bloomberg) -- Russian stocks jumped the most in more than a month as OAO Mechel, the nation’s largest coking-coal producer, rallied after a 41 percent plunge.

The Micex Index added 1.6 percent, the most since Oct. 8, to 1,490.89 by the close in Moscow, after slumping the most in three months yesterday. Mechel, which also manufactures steel, gained 12 percent to 63.60 rubles. OAO Severstal, Russia’s second-biggest steel producer, increased 3.3 percent to 278 rubles as third-quarter profit of $157 million beat estimates.

Mechel is being punished in the bond and equity markets as it seeks to obtain a waiver from debt covenants. The Moscow-based company is the worst performer on the benchmark gauge this year, with a drop of 69 percent.

“Mechel is bouncing back after yesterday’s slump,” Vladimir Bragin, head of research at Alfa Capital in Moscow, said by phone. “It’s a good time to play on the rebound.”

The Russian company, whose net debt was $9.55 billion as of June 1, has as much as $2.48 billion due next year, according to a June presentation on its website. Yesterday’s sell-off was “purely speculative” and covenant talks are on schedule to be completed by the end of the month, Mechel spokesman Arseny Palagin said by phone.

Mechel’s preferred shares surged 11 percent, the most since April 2011, to 37.85 rubles. The yield on Mechel’s 5 billion rubles ($152 million) of February 2021 bonds, which investors can force the company to redeem next year, tumbled to 160 percent today after surging to a record-high of 243 percent yesterday.

Gazprom, Dixy

Mechel’s 14-day relative strength index dropped to 8.01 yesterday, below the threshold of 30 which signals a security is oversold. The index was at 18.55 today.

OAO Magnitogorsk Iron & Steel increased 2.5 percent to 7.715 rubles. Severstal gained 2.4 percent to $8.505 in London.

OAO Gazprom, the nation’s biggest company and natural gas producer, climbed 2.5 percent to 146.09 rubles. Net income rose to 202 billion rubles in the quarter ended June 30 from a restated 156 billion rubles the previous year, the Moscow-based company said on its website. The shares jumped 2.7 percent to $8.90 in London.

OAO Dixy Group, Russia’s third-largest food retailer, advanced 1.2 percent to 410 rubles. The company said 10-month retail sales rose 23.5 percent from a year earlier.

Brent climbed 1.1 percent to $108.30 in London, while West Texas Intermediate crude oil dropped 0.8 percent to $93.15 in New York. Russia receives about half of its budget revenue from oil and natural gas sales.

The RTS Index increased 2 percent to 1,434.44. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.2 times projected 12-month earnings, compared with a multiple of 10.4 for the MSCI Emerging Markets Index.

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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