RusHydro Jumps as Rate Cut Prospects Lift ADRs: Russia Overnight
Russian stocks traded in New York gained on prospects Bank Rossii will move to cut interest rates after reducing the cost to swap foreign currency. OAO RusHydro (RSHYY) rallied after approving the sale of a stake at a premium.
The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. posted the longest stretch of increases in two weeks as RTS stock-index futures expiring on Dec. 17 were little changed. American depositary receipts of RusHydro (HYDR), Russia’s biggest renewable energy producer, jumped the most since May 21 after it approved the issuance of 110 billion ordinary shares to the government at a 36 percent premium to its Dec. 7 Moscow closing price.
The central bank took a step toward the first round of monetary easing in a year after cutting yesterday the cost to swap foreign currency into rubles by a quarter point to 6.5 percent to help shore up the economy. Deputy Economy Minister Andrei Klepach said yesterday the government lowered its growth forecast for this year to 3.6 percent from 3.7 percent, citing a deceleration in consumer lending and real wage increases.
“The central bank’s decision today is a positive factor for those who borrow money to buy shares,” Alexander Morozov, the chief economist for Russia at HSBC Holdings Plc, said by phone yesterday from Moscow. “It creates more predictability for such investors, gives them more confidence.”
RusHydro surged 6.7 percent to $2.38 in New York yesterday. The stock gained 3.4 percent to 76.01 kopecks, or 2.47 U.S. cents, in Moscow yesterday. The company’s global depositary receipts rose 4.7 percent to $2.41 in London yesterday, the highest level since Nov. 23.
RusHydro’s board approved the additional share issue and said the company will transfer them to the government, according to a Dec. 10 regulatory filing. The government owned 60.5 percent of RusHydro as of June 30 according to its website. It has injected 50.2 billion rubles into the company last week, in exchange for the new shares.
Russian President Vladimir Putin delayed electricity tariff increases before the presidential vote on March 4, hampering Rushydro’s efforts to fund a four-year, $12.3 billion investment plan. Putin last month signed a decree approving a government proposal to provide RusHydro with as much as 50 billion rubles ($1.6 billion) from the budget this year and allowing the company to issue additional shares to increase its capital, according to an e-mailed copy of the document.
“It’s the best-case scenario for RusHydro so far,” Sergey Beiden, an analyst at Otkritie Financial Corp. who has a hold rating on RusHydro, said by phone from Moscow yesterday. “It excludes, at least for now, market-unfriendly approaches toward the reform of the company.”
The Bloomberg Russia-US Index climbed 1.1 percent to 96.44 yesterday, the highest level since Oct. 23. The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, added 0.7 percent to $28.84, the highest close since Oct. 22. The RTS Volatility Index, which measures expected swings in futures, fell 4.1 percent to 23.54.
Futures expiring in December on the ruble showed the currency weakening 0.1 percent to 30.806 per dollar after the ruble gained 0.6 percent to 30.72 against the dollar yesterday.
Oil, which together with natural gas accounted for half of Russia’s federal budget revenue last year, declined for a fifth day in New York yesterday, losing 0.4 percent to $85.56 a barrel on the New York Mercantile Exchange yesterday, the lowest settlement since Nov. 15. Prices are down 13 percent this year.
Brent for January settlement added 0.3 percent to $107.33 a barrel on the London-based ICE Futures Europe exchange. Urals crude, the country’s main export blend, fell 0.1 percent to $105.48 a barrel yesterday.
OAO Mechel (MTLR), Russia’s largest producer of steelmaking coal, advanced 2.9 percent to $6.43 in New York yesterday, the highest level since Nov. 6. The ADRs settled at a 2.8 percent premium to the company’s Moscow-listed stock, the highest since Oct. 17. The stock slipped 0.4 percent to 192.1 rubles, or $6.25.
Aton Capital cut its recommendation on Mechel to sell from hold, reducing the target price to $5 per ADR from $6.5.
OAO GMK Norilsk Nickel (NILSY), the world’s largest producer of the metal, fell 0.4 percent to $17.65. Trading volumes in the stock was more than 10 times the daily average for the past three months, data compiled by Bloomberg show. The company advanced 1.5 percent to 5,376 rubles, or the equivalent of $174.92, on the Moscow Exchange, the highest level since July 3. One ordinary share represents 10 ADRs.
United Co. Rusal, the world’s largest aluminum producer, dropped 1 percent to HK$4.83 in Hong Kong trading as of 11:24 a.m. local time. The MSCI Asia Pacific Index fell 0.1 percent.
-- With assistance from Moming Zhou in New York. Editor: Tal Barak Harif
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