Putin’s Call Home to Moscow Ignored as Russian ADRs Rally
New York stock traders are unimpressed by President Vladimir Putin’s push to get Russian companies to delist overseas.
Russian stocks traded in the U.S. advanced 0.5 percent yesterday and the Market Vectors Russia (RSX) exchange-traded fund, the largest U.S.-based ETF investing in the nation’s shares, rose 1 percent.
The gains show investors are dismissing Russia’s call for companies to focus trading in Moscow as little more than political posturing amid the standoff over Ukraine. After announcing the initiative yesterday, First Deputy Prime Minister Igor Shuvalov said in a telephone interview the move isn’t mandatory and companies will make independent decisions.
“The market has made up its mind and believes the delisting probably won’t happen,” Ilya Kravets, director of investment research at Daniloff Capital LLC, said by phone from New York yesterday. “Russian companies need capital and they are not going to cut foreign investors off.”
The U.S. and Europe are threatening to step up economic sanctions against Russia following Putin’s move to annex Crimea from Ukraine last month. Higher borrowing costs led the government to scrap ruble-bond auctions in five of the last six weeks. Since the incursion into the Black Sea peninsula on March 1, investors turned to offshore equity trading, with London volume growing faster than that of Moscow.
Search-engine company Yandex NV (YNDX), which only trades in New York, increased for the first time in five days. The RTS Index declined 0.3 percent by 12 p.m. in Moscow to 1,192.33.
The average daily volume in 10 of the country’s biggest stocks was 46 percent higher in the U.K. than in Russia over the past 30 days, according to data compiled by Bloomberg. That gap had vanished before Putin began taking Crimea from Ukraine a month ago.
Russia’s benchmark Micex Index (INDEXCF) entered a bear market on March 13 and $108 billion were erased from Russian equities this year as President Barack Obama imposed economic sanctions on officials and billionaires close to Putin.
“I wouldn’t treat it lightly,” Renata Klita, an analyst at Blackfriars Asset Management Ltd, said by phone from London yesterday about the call for Russian companies to delist from exchanges overseas. “It doesn’t seem like it was just tit-for-tat. We think there might be an actual follow-up behind it.”
Russia and the U.S. are on a collision course after tensions flared anew in Ukraine. With Russian forces deployed on the border, the U.S. and its allies are concerned Putin may be planning incursions into eastern Ukraine after annexing Crimea. The Russian Economy Ministry cut its forecast for 2014 economic growth yesterday, as did the International Monetary Fund.
“This is a question of economic security,” Shuvalov told reporters after a government meeting near Moscow yesterday. The Russian government is creating “attractive” conditions for companies that decide to re-register in Moscow, he said.
The RTS Volatility Index, which measures expected swings in the stock-index futures, increased 4 percent to 39.78 today.
Companies including Yandex, Mail.ru and VimpelCom Ltd. (VIP) are only traded on exchanges abroad while OAO Rosneft, OAO Gazprom and OAO Sberbank, among others, have shares listed in Moscow and London.
Polyus Gold International’s board of directors will consider delisting shares from London soon, Kommersant reported, citing unidentified people. Polyus Gold spokesman Sergey Lavrinenko declined to comment by phone to Bloomberg.
“If someone from the government uses soft, roundabout language like this, it doesn’t have much impact,” Vladimir Tsuprov, the St. Petersburg-based chief investment officer of TKB BNP Paribas, said by e-mail yesterday. “Clearly Shuvalov won’t be the one to decide whether or not Gazprom, Rosneft and Sberbank delist from the London Stock Exchange.”
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