Russia Stocks Climb Second Day as Rosneft Gains on TNK-BP Deal

Russian equities climbed for a second day as OAO Rosneft, the country’s biggest oil company, sealed its acquisition of TNK-BP, offsetting a drop in crude.

The Micex Index rose as much as 0.5 percent before declining prices for oil, Russia’s main export earner, pared the gain to less than 0.1 percent by the close at 1,459.22. The dollar-denominated RTS Index fell 0.2 percent to 1,485.73. Rosneft added 2.1 percent and OAO Gazprom, the natural gas export monopoly and the biggest stock in the index by weighting, increased 0.2 percent.

Rosneft’s $55 billion deal to buy TNK-BP, makes the state-controlled company the world’s largest publicly traded oil producer by output. Russia, the world’s biggest energy exporter, will consider making investments in the Cypriot energy industry as it is unable to provide loans, the island nation’s Finance Minister Michael Sarris said today in an interview broadcast on Antenna TV.

“There’s an idea in the market that the deposit levy won’t happen and that Russia will save Cyprus eventually,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd. in Moscow, said by phone from Moscow.

A plan to tax deposits in Cyprus drove Russian shares to a three-month low on March 18. Sarris said he will have a meeting later with his Russian counterpart, Anton Siluanov.

The Micex pared gains as Brent oil fell as much as 0.8 percent to $107.82 a barrel in London after German manufacturing output unexpectedly contracted in March, signaling the euro-zone debt crisis is slowing growth in the region’s biggest economy.

VTB, Rostelecom

Russian lenders and companies had about $31 billion placed in Cypriot banks or their own units at the end of 2012, according to a report from Moody’s March 13. At least $30 billion in further exposure comes in bank loans to Cypriot companies of Russian origin, the ratings company said.

VTB Group, Russia’s second largest lender which has a subsidiary in Cyprus, slid 1.3 percent to 5.17 kopeks.

OAO Rostelecom’s ordinary shares rallied 3.5 percent, while the fixed-line operator’s preferred stock was the biggest decliner on the Micex with a 3.6 percent drop.

The company’s board may recommend buying common shares at 136.05 rubles apiece, based on a valuation by Ernst & Young, Interfax reported yesterday. The telecom operator may also buy preferred shares at 95.24 rubles, Vedomosti reported today, citing unidentified directors on the proposals for a March 27 board meeting.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, gained 0.5 percent to $27.96. The RTS Volatility Index, which measures expected swings in the index futures, fell 1.3 percent to 21.39.

ETF Puts

Puts protecting against a 10 percent retreat in the Market Vectors Russia exchange-traded fund cost 7.5 points more than calls betting on a rally of the same magnitude, one-month data compiled by Bloomberg showed yesterday.

The Micex trades at about 5.5 times estimated earnings and has lost 1.1 percent this year. That compares with a multiple of 10.7 times for the MSCI Emerging Markets Index, which dropped 3.1 percent over the same period.

Before it's here, it's on the Bloomberg Terminal.