Putin Return Lifts Futures: Russia Overnight
Futures expiring in June on Moscow’s dollar-denominated RTS Index added 0.6 percent to 143,745 in New York trading. American depositary receipts of OAO Gazprom (OGZPY), Russia’s biggest company and the world’s largest natural gas producer, rallied from their lowest level this year, while OAO Mobile TeleSystems (MBT), the nation’s biggest mobile-phone operator, gained the most in more than a week.
Putin, whose first eight years in the Kremlin saw average economic growth of 7 percent as oil prices rose fivefold, signed at least a dozen decrees after being sworn in yesterday and said the world’s biggest energy exporter was beginning a “new stage” in its development. Russia’s Micex Index has tumbled 20 percent since Putin passed on the presidency to Dmitry Medvedev in May 2008 because of term limits.
Futures gained “on the back of President Putin’s fast reaction to sign and define timelines for pro-market reforms only hours after being sworn in,” Marco Casas, vice president of equity sales at Otkritie Inc., the New York arm of Moscow brokerage Otkritie Financial Corp., said by phone yesterday. “Investors have been looking for signals from Putin or his officials to get a sense of what path he will be taking this time. Today’s actions have been taken positively.”
Gazprom, Russia’s state-run natural gas monopoly, rose 2 percent to $11.01 in New York yesterday, after slumping to $10.79 on May 4, the weakest since Dec. 30. The Moscow-based company’s stock advanced 0.9 percent to 165.60 rubles, or $5.52, on the Micex. One Gazprom ADR is equal to two ordinary shares.
Chief Executive Officer Alexey Miller said he isn’t joining the government and plans to remain at Gazprom, the RIA Novosti news agency reported yesterday.
ADRs of Mobile TeleSystems climbed 2.7 percent to $18.91, the steepest one-day gain since April 25. The company’s shares gained 0.5 percent to 233.78 rubles, or $7.79 on the Micex, where trading was reduced because of Russian holidays yesterday and today. One ADR is equal to two shares.
Putin nominated Medvedev as his prime minister and signed decrees designed to boost real incomes, create more jobs and boost investment and labor productivity, the Kremlin said in an e-mailed statement yesterday.
The former KGB officer, who held the premier’s position during Medvedev’s presidential reign, ordered the government to formulate plans this year for state companies to divest “non- core assets” and for government stakes in non-commodity producers to be reduced, according to the statement.
Power Stocks to Benefit
Power and utility stocks will benefit most from Putin’s return, on prospects the new government will set new rules that provide predictability for the industry, according to Mattias Westman, founder of London-based Prosperity Capital Management, a Russia-focused fund manager with about $5 billion of assets.
Putin and his team “want to make a good impression, they do want to be serious, but they have to lift the horizon a bit as unpredictability is one of the things that is holding the market back,” Westman said in a May 4 phone interview. “We were slightly paralyzed by this election period for the past six months.”
The Micex -- which was little changed in Moscow yesterday and has slipped 1.2 percent this year -- may gain as much as 30 percent by the end of 2012, Westman said.
Oil Drop Hits Index
ADRs of OAO RusHydro (RSHYY), Russia’s largest hydropower producer, gained 0.3 percent to $3.13 in New York, after trading little changed at 94 kopeks, or 3 U.S. cents, in Moscow. One ADR is equal 100 ordinary shares. RusHydro trades for 7.7 times estimated earnings in the U.S., compared with an average multiple of 12.3 times for power and utilities companies on the MSCI Emerging Markets Index.
The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. slid to a four-month low yesterday, led by oil producer OAO Surgutneftegas (SGTPY), as crude slumped to the weakest level in three months on global economic concerns. The gauge sank 0.5 percent to 96.35, the least since Jan. 13.
The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, fell 0.5 percent to $27.51, the lowest since Jan. 9. The RTS Volatility Index, which measures expected swings in the index futures, fell 1.6 percent to 31.30 points.
Surgutneftegas, Russia’s fourth-largest oil producer, declined 3.4 percent to $6.02 in New York, the lowest since Jan. 30. The ADRs traded at a 1.2 percent discount to the company’s Moscow-listed shares, the most since April 20. The company gained 0.8 percent to 26.86 rubles, or 90 U.S. cents on the Micex yesterday. One depositary receipt is equal to 10 ordinary shares.
Urals crude, Russia’s chief export blend, was little changed at $111.06 a barrel. Crude for June delivery slid 0.6 percent to $97.94 on the New York Mercantile Exchange, the lowest since Feb. 6. Prices have fallen 11 percent since Feb. 24, when they reached a 2012 high of $109.77. Brent oil for June settlement slid 2 cents to settle at $113.16 on the London-based ICE Futures Europe exchange.
Hundreds of protesters were detained at a rally in central Moscow after clashes with police yesterday, when Putin was sworn in. The new president’s campaign was accompanied by demonstrations after allegations of ballot-box fraud in the December parliamentary vote.
“A lot of people expected things to settle down already,” Ian McCall, a managing partner at Quesnell Capital SA, an emerging-markets investment adviser in Geneva that oversees 100 million Swiss francs ($109 million), including Russian assets, said by phone yesterday. “These protests, coupled with electoral results in Greece and France, suffering U.S. economic data and problems in China, are not constructive for the Russian market.”
Socialist candidate Francois Hollande defeated President Nicolas Sarkozy in French elections on May 6, while Greece’s political leaders struggled to form a coalition government after voters flocked to anti-bailout parties.
Yandex NV (YNDX), Russia’s most-used Internet search engine, fell 3.3 percent to $22.57 in New York. The company’s share of Russian Internet searches climbed in the week to May 6, while the portions for competitors Mail.ru Group Ltd. and Google Inc. declined, data compiled by Liveinternet.ru showed.
“Putin’s third government will not be undertaking any serious reforms at all,” Ian Hague, who manages Russian equities as a partner at Firebird Asset Management, which oversees $1.3 billion, said by phone yesterday in New York. “As long as energy prices remain high they will not undermine the consensus within the political elite on transformational policies, innovation and real reform.”
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