Futures Slide as ADRs Drop After Jump: Russia Overnight

Russian stock futures fell and equities traded in New York declined, led by OAO Mechel and OAO RusHydro, after a five-week rally pushed company valuations to the most expensive level since September.

Futures expiring in March on Moscow’s RTS Index slid 0.3 percent in U.S. hours to 157,120. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks listed in New York retreated for a second day, losing 1.2 percent to 100.09, the steepest slump in more than two weeks. Companies on the gauge, which includes American depositary receipts of OAO Gazprom and OAO Sberbank, traded for an average 6.25 times estimated earnings Jan. 4, the most expensive level since Sept. 14.

Russian stocks and ADRs in New York have rallied in 2013 as oil, the nation’s biggest export earner, rose 1.5 percent and as the deal to avert U.S. spending cuts and tax increases steadied the outlook for the world’s biggest crude consumer. Oil ended yesterday down less than 0.1 percent, and the Standard & Poor’s 500 Index slipped 0.3 percent to the lowest level this year.

“Russia is part of this risk-on, risk-off dynamic that’s affecting the whole world at the moment,” Ian Hague, a founding partner at Firebird Management LLC, which manages $1.3 billion, including investments in Russian equities, said by phone in New York yesterday. “Oil demand is not particularly robust because we’re still in a period of subdued economic growth.”

Extended Ruble

Russian markets resumed trading for 2013 yesterday after a six-day holiday, with the 50-stock, ruble-denominated Micex Index adding 2.7 percent to 1,514.82. The Micex traded down 0.1 percent at 1,513.35 as of 12:10 p.m. in Moscow today.

The Market Vectors Russia ETF, the largest exchange-traded fund dedicated to Russian stocks, retreated 1 percent to $29.85 in New York, the lowest level since Dec. 28. The RTS Volatility Index, which measures expected swings in equity futures, rose 3.1 percent to 22.49 points.

The ruble had its first extended trading session yesterday, rallying the most since September against the central bank’s dollar-euro basket. The currency ended yesterday 0.6 percent stronger versus the dollar, up 1.5 percent against the euro and 1.1 percent higher versus the basket, which is used by policy makers to shepherd movements in the ruble.

President Vladimir Putin signaled last quarter that ruble-denominated government bonds known as OFZs would be made accessible to foreign investors for direct settlement in 2013. Euroclear SA, owner of a global bond settlement system, opened an account with Russia’s National Settlement Depositary Dec. 27 and is waiting for clearance from the market watchdog for the account to become active, Stephan Pouyat, the bank’s head of product management global reach, said by e-mail Jan. 4.

‘Ongoing Inflows’

The opening up of the domestic sovereign debt market “should mean ongoing inflows and increasing investor participation from abroad,” Nick Chamie, global head of emerging-markets and currency strategy at Royal Bank of Canada, said by phone from Toronto yesterday.

Futures contracts expiring in March on the ruble showed the currency weakening 0.1 percent to 30.63 per dollar in New York trading hours yesterday.

ADRs of Mechel, Russia’s biggest producer of steelmaking coal, tumbled 4.6 percent to $7.06 yesterday in New York, the biggest one-day decline since Nov. 7. The ADRs rose in 2013 to trade at the biggest premium to Mechel’s Micex-listed stock in three years Jan. 7, with Russian markets closed Dec. 31 to Jan. 7 for New Year holidays.

Mechel surged 7.1 percent yesterday in Moscow to 218.9 rubles, or the equivalent of $7.22, and traded at a 2.2 percent premium to the ADRs. One depositary receipt is equal to one share.

Norilsk Jumps

RusHydro, Russia’s state-run hydroelectricity producer, lost 4 percent to $2.42 in New York, also the biggest slump since Nov. 7. The Moscow-based company’s shares on the Micex added 0.9 percent, the most since in three weeks, to 74 kopeks, or 2.4 U.S. cents.

OAO GMK Norilsk Nickel, the world’s largest nickel and palladium producer, gained 1.1 percent to $19.05 in New York, the biggest advance in almost a week. Norilsk’s shares in Moscow added 2.5 percent to 5,744 rubles, or $189.52, the highest closing price since March 19.

Demand for palladium, last quarter’s best performing precious metal, is exceeding supply for a second consecutive year as mine production stagnates while sales by automakers, the biggest buyers, reach record highs, according to estimates from Barclays Plc.

VimpelCom Ltd., Russia’s third-biggest mobile phone provider, sank 3.7 percent to $10.57 yesterday in the U.S. for the steepest one-day slump since Oct. 23.

Brent oil for February settlement added 0.5 percent to $111.94 a barrel on the London-based ICE Futures Europe exchange yesterday, while Urals crude, Russia’s chief export blend, gained 0.5 percent to $110.65 a barrel.

United Co. Rusal, the world’s largest aluminum producer, rose 0.6 percent to HK$5.02 in Hong Kong trading as of 10:53 a.m. local time. The MSCI Asia Pacific Index gained 0.3 percent.

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