Share Surge Thwarting World’s Best QE3 Rally
The biggest surge in Russian share sales since 2007 is blunting gains in the market spurred by the Federal Reserve’s third round of asset buying.
Russia’s Micex Index (INDEXCF) climbed an average 77 percent during the Fed’s first two courses of so-called quantitative easing and slipped 0.6 percent during periods without stimulus, the biggest difference of 46 emerging and developed markets tracked by Bloomberg. Since the announcement of QE3 on Sept. 13 to yesterday’s close, the Micex has lost 1.1 percent, compared with a 2.2 percent advance in the MSCI Emerging Markets Index, as OAO Sberbank (SBRCY) raised 159.3 billion rubles ($5.2 billion) in the largest share sale by a Russian company since before the global recession.
Russia-domiciled companies have issued $6.64 billion of stock in 2012, the most since the $22.4 billion raised in 2007, data compiled by Bloomberg show. Phone company OAO MegaFon is poised to add to that tally, with its initial public offering valued at as much as $11 billion, people familiar with the plans say. The Micex Index dropped less than 0.1 percent to 1,455.47 by 12:48 p.m. in Moscow today.
“Sberbank’s secondary public offering sucked out most of the liquidity from the Russian market,” Mikhail Akramovsky, who manages $850 million in Russian assets at Allianz Rosno Asset Management in Moscow, said by phone yesterday. “The free cash that people had and wanted to use after QE3 went into Sberbank. Now people are preparing for Megafon’s IPO, which isn’t supporting the market either.”
The Bloomberg Russia-US Equity Index (RUS14BN) of Russian U.S.-listed stocks added 0.5 percent yesterday, paring this month’s 5.6 percent drop, and RTS stock-index futures were steady at 148,310 in New York.
Russia ETF Gains
The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 0.5 percent to $29.02. The fund gained 10 percent in the third quarter. The RTS Volatility Index climbed 0.9 percent to 26.76.
Output at U.S. factories, mines and utilities climbed 0.4 percent in September, beating the median forecast of economists surveyed by Bloomberg, after a 1.4 percent drop in August that was the biggest since March 2009, according to data from the Federal Reserve released in Washington yesterday.
“People are back to taking risk,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone from New York yesterday. “Investors are getting more confident about global growth.”
The Moscow-listed stock of Sberbank, Russia’s biggest lender, has dropped 2.7 percent since its Sept. 18 offering, while shares of VTB Group, the second-largest bank who raised $8 billion in a 2007 IPO, have slumped 5.9 percent.
American depositary receipts of OAO Sberbank added 2.5 percent to $12.06 in New York yesterday, the most since Sept. 14. The ADRs settled at a 1.1 percent premium versus the bank’s Moscow-traded shares, the widest in a week. Sberbank’s stock gained 0.2 percent to 92.28 rubles in Moscow today. Each ADR represents four ordinary shares.
The sale of a minority stake in Sberbank followed a $266 million IPO by oil exporter RusPetro Plc (RPO) in January, data compiled by Bloomberg show. Internet company Mail.ru Group Ltd. (MAIL) had two share sales this year amounting to $530 million, OAO Moscow Bearing, a bearing manufacturer, raised $500 million in an additional offering, and Moscow-based retailer M.Video sold $146 million of stock, the data show.
MD Medical Group Investments Plc, which runs Russia’s largest chain of maternity centers and is domiciled in Cyprus, raised $311 million in an Oct. 12 IPO in London.
“We’ve digested a decent amount of new issuance, and in an environment where inflows have been muted, to then add to new issuances, it could be tricky for the engines to fully push us forward,” Farhan Kazmi, head of emerging-market equities at Credit Suisse Securities in Moscow, said by phone on Oct. 12.
OAO Promsvyazbank, the nation’s third-largest privately owned lender by assets, deferred its IPO on Oct. 15, saying the offers it was getting for its shares didn’t reflect “fair value” for the bank. The Moscow-based lender may revisit the postponement once market conditions improve, according to its statement.
The Micex trades at 5.6 times analysts’ earnings estimates, the cheapest among the largest emerging equity markets. Companies in India’s BSE India Sensitive Index trade at a ratio of 14.7, compared with 14.2 for shares in Brazil’s Bovespa index and 9.8 for the Shanghai Composite Index.
OAO Mechel (MTL), Russia’s biggest producer of coal for steelmakers, advanced 1.6 percent to $6.83 in New York. The ADRs were the second biggest gainers on the gauge after Sberbank. The stock lost 0.2 percent to 210.40 rubles, or $6.83, in Moscow today.
The Standard & Poor’s GSCI Spot Index of 24 raw materials climbed less than 0.1 percent to 664.36 in New York today.
“There is a splash of optimism fueled by an increase in commodities prices,” Vladimir Tikhomirov, chief economist at Otkritie Capital in Moscow, said by phone from Moscow yesterday.
Crude oil for November delivery advanced 0.1 percent to $92.20 a barrel on the New York Mercantile Exchange today. Urals crude, Russia’s chief export blend, rose less than 0.1 percent to $113.40 per barrel yesterday.
A U.S. Energy Department report will show that U.S. crude oil inventories rose 1.5 million barrels last week, according to the median of nine analysts surveyed by Bloomberg. The department is scheduled to release its weekly report at 10:30 a.m. today in Washington.
United Co. Rusal, the world’s largest aluminum producer, dropped 0.2 percent to HK$4.30 in Hong Kong as of the city’s noon trading break. The MSCI Asia Pacific Index gained 1.1 percent.
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