Mechel Leads Gains as Commodities Rise: Russia Overnight
The benchmark index of Russian stocks traded in New York climbed to a two-week high, led by OAO Mechel (MTL), as prices for commodities and crude oil rebounded.
The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. added 0.3 percent to 92.11, rising for a fifth day in its longest stretch of gains since the start of September. Futures on Moscow’s RTS Index were little changed at 141,700, while the Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, gained 1 percent to $27.62, the highest level since Nov. 6.
Declining U.S. oil inventories sparked a 0.7 percent advance in crude oil, Russia’s biggest export earner. Urals crude, the nation’s chief export blend, has gained 4 percent in the past two weeks as the conflict between Israel and Hamas stoked prospects Middle East supplies would be disrupted. The S&P GSCI Index Spot Index of raw materials rose 0.5 percent to 646.01 yesterday, after sliding 1.2 percent on Nov. 20.
“Russia is a very cyclical play, with oil and steel,” Arjun Jayaraman, who manages $400 million in emerging-market equities in Los Angeles at Causeway Capital Management LLC said by phone yesterday. “We’ve seen a near-term pickup in oil prices due to the situation in Israel and Gaza, so that may be helping oil, and that will help Russia.”
The RTS Volatility Index, which measures expected swings in futures, slid 0.7 percent to 24.51 points.
American depositary receipts of Mechel, Russia’s biggest maker of steelmaking coal, jumped 2.3 percent to $6.1 in New York, a one-week high. The ADRs traded at a 0.4 percent discount to Mechel (MTLR)’s Moscow stock, the least since Oct. 16.
The miner extended a 13 billion ruble credit line with VTB Group to the middle of 2013 from this year after agreeing to pay nearly twice the interest rate, the Vedomosti newspaper reported on Nov. 19, citing a financial statement.
Mechel had $9.15 billion of debt at the end of the last quarter, with a net debt-to-earnings before interest, tax, depreciation and amortization ratio of 4.85, making it the third-most indebted company in Russia’s metals and mining industry.
Moscow-based Mechel is the worst performer in the Russia-US index in 2012, dropping 28 percent. The ADRs reached their biggest discount to Moscow in seven weeks on Nov. 16 after MSCI Inc. said the previous day that the stock would be moved from its Russia Large Cap Index to the Mid Cap gauge.
Mechel is one of Russia’s most oversold stocks “and could generate double-digit returns in a week on a healthy index rebound,” Chris Weafer, chief strategist at Sberbank CIB, an arm of Russia’s largest lender, wrote in a Nov. 20 note.
Deutsche Bank AG equity analyst George Buzhenitsa upgraded the stock to hold from sell yesterday and set a 12-month price target of $5.60 a share. Mechel rose 0.9 percent to 190.9 rubles, or $6.12, on Russia’s 30-stock Micex Index yesterday. The Micex added 0.7 percent to 1,405.7.
Oil for January delivery gained 63 cents to settle at $87.38 a barrel on the New York Mercantile Exchange, while Brent for January delivery advanced 0.9 percent to $110.81 on the ICE Futures Europe exchange in London. Urals crude climbed 0.9 percent to $110.03.
OAO GMK Norilsk Nickel (NILSY), the world’s largest producer of the metal, also gained in New York.
ADRs of Norilsk increased 1.2 percent to $15.01. Shares advanced 0.9 percent in Moscow to 4,692 rubles, or $150.5. One ADR represents one-tenth of a Micex share.
Nickel climbed for a fourth day on the London Metal Exchange and reached a one-month high yesterday.
Futures on the Russian currency expiring in December added 0.1 percent to 31.292 per dollar during U.S. trading hours yesterday, the strongest level since Oct. 19.
United Co. Rusal, the world’s largest aluminum producer, was unchanged at HK$4.43 in Hong Kong trading as of 11:26 a.m. local time. The MSCI Asia Pacific Index gained 0.9 percent.
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