Mechel Discount to ADRs Swells in Break: Russia Overnight

Russia’s stock market opened after a six-day holiday with OAO Mechel trading at the lowest level versus New York in three years and OAO Novolipetsk Steel at the biggest discount since 2008 to London.

The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. has rallied 3.5 percent since Dec. 28, the last day of 2012 trading on the Moscow Exchange. The FTSE Russia IOB Index of the biggest Russian stocks traded in London climbed 3.1 percent. Moscow’s Micex Index jumped 2.3 percent to 1,508.25 as of 10:48 a.m., data from the Moscow Exchange website show.

American depositary receipts of Mechel, Russia’s top maker of steelmaking coal, have risen 9.3 percent since Dec. 28 to trade 9.9 percent above its Micex shares, the widest premium since February 2010, while Novolipetsk’s 8.7 percent GDR premium is the widest since Oct. 17, 2008. Global equity markets rallied in the first week of 2013 as U.S. lawmakers agreed to a deal to avert automatic spending cuts and tax increases. Crude, the nation’s biggest export earner, increased to the highest price since September.

“We have to see that jump up for Russia because it has to basically catch up with the other equity markets,” Ilya Kravets, who helps manage $100 million of assets at Daniloff Capital LLC, including Russian stocks, said by phone in New York yesterday. “There are always internal issues with Mechel, but once you have these outside forces they can overpower a lot of that. If we see significantly strong demand in coal then Mechel would do really, really well.”

Rostelecom Leads

The Russia-US index slipped 1 percent to 101.28 yesterday, the biggest decline since Dec. 21. The Market Vectors Russia ETF, the largest U.S.-traded exchange-traded fund that holds Russian shares, decreased 1.4 percent to $30.14, the most in two weeks.

ADRs of Mechel climbed 0.5 percent to $7.4 in New York yesterday, the highest price since Sept. 21.

Russia’s state-run telephone operator OAO Rostelecom added 0.6 percent to $25.49 in New York yesterday to lead gains on the Russia-US index. American depositary receipts of Rostelecom trade 7.3 percent above its Micex shares.

The ruble’s 5.7 percent rally against the dollar in 2012 will continue into 2013, Murat Toprak, a strategist in London at HSBC Holdings Plc who ranked top forecaster as measured by Bloomberg, said by phone on Jan. 4. The currency is set to gain 1.9 percent over the next three months, while its advance last year was the best among the four major emerging nations.

Nickel Price

OAO Sberbank, Russia’s largest lender, dropped 1.8 percent to $13.01 in New York, paring its gain since Dec. 28 to 5.6 percent. ADRs of Sberbank trade 6.2 percent above its Micex shares, the most since September 2011. Sberbank’s London-traded depositary receipts posted a 6.1 percent premium.

OAO GMK Norilsk Nickel, the world’s largest nickel and palladium producer, sank 2.7 percent to $18.85, the biggest slump since Nov. 13, to lead declines on the Russia-US index yesterday. Nickel prices have fallen 2.8 percent over the past three days, the biggest slump since Oct. 24. Norilsk ADRs traded 2.1 percent above its Micex shares yesterday.

The Standard & Poor’s GSCI gauge of 24 commodities rallied 0.3 percent to 648.69, rising for the first time in three days.

Crude oil for February delivery added 0.1 percent to $93.19 a barrel on the New York Mercantile Exchange yesterday, the highest settlement since Sept. 18. Brent oil for February settlement gained 0.1 percent to $111.41 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export oil blend, slipped 0.6 percent to $110.14 yesterday.

OAO Lukoil, Russia’s second-biggest oil company, slipped 1 percent to $66.71 yesterday in New York, the biggest slump in two weeks. Lukoil’s ADRs trade at a 0.8 percent premium to shares in Moscow. The company is one of only two Russian oil producers to post a decline in production in 2012, data from the Energy Ministry’s CTEK unit showed last week. Production at OAO Slavneft also declined.

United Co. Rusal, the world’s largest aluminum producer, dropped 1.2 percent to HK$4.99 in Hong Kong trading as of 10:14 a.m. local time. The MSCI Asia Pacific Index fell 0.3 percent.

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