Mechel Soars as China Trumps GDP Ghost: Russia OvernightHalia Pavliva
OAO Mechel, Russia’s biggest producer of coal for steelmakers, surged the most in a month in New York as better-than-estimated Chinese industrial output outweighed slower growth in the world’s largest energy exporter.
American depositary receipts of Mechel rallied 8.8 percent on Aug. 9, extending the biggest weekly gain since January, to close at a 6.1 percent premium versus the Moscow shares. The Bloomberg-Russia-US Equity Index of the most-traded Russian companies in New York rose 0.1 percent for the week. CTC Media Inc., Russia’s only publicly-traded television company, capped the longest weekly slide this year. RTS stock-index futures added less than 0.1 percent to 132,220 in U.S hours Aug. 9.
Mechel, the worst performer among Russian companies in New York this year, joined a rally in commodities amid speculation China’s demand for raw materials will rise on stronger output data. The advance outweighed the announcement last week that Russia’s gross domestic product unexpectedly slowed in the second quarter. The benchmark Micex Index trades at 5.2 times estimated earnings, the lowest valuation among 21 emerging markets tracked by Bloomberg.
“Russian stocks are extremely cheap and it’s a good time to buy exporters because of the obvious signs of rebound in the global economy,” Ilya Kravets, the director of investment research at Daniloff Capital LLC, said by phone from New York on Aug. 9. “Everyone understands demand for metals and commodities overall is picking up.”
Sales of Mechel’s mining subsidiaries to China accounted for 30 percent of revenue in 2012, up from 19 percent in the previous year, the company said in an April 15 presentation.
Mechel also gained last week as Morgan Stanley said the company will benefit from mounting demand as Russian policy makers begin cutting interest rates to stimulate the economy. Russia’s central bank, which left its main rates unchanged for an 11th month on Aug. 9, will probably face another bout of pressure to ease policy after gross domestic product expanded at almost half the pace predicted by economists.
The stock may be “attractive to investors with some risk appetite,” as coking coal prices rise, according to an Aug. 7 note by BCS Financial Group. Metallurgical coal prices may rebound amid supply cuts, Bloomberg Industries’ analysts Kenneth Hoffman and Andrew Cosgrove wrote last week.
Mechel gained 8.5 percent for the week to $3.20 to trade at the widest premium in five months over its Moscow shares. The rally trimmed this year’s decline of the ADRs to 54 percent, compared with an 8.5 percent slump of the measure of the most-traded Russian stocks in New York.
The Bloomberg Russia-US gauge rose to 90.91 last week. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, slid 0.6 percent to $26.15. The RTS Volatility Index, which measures expected swings in the stock futures, increased 1.1 percent to 21.23 points on Aug. 9.
CTC Media sank 5.5 percent to $10.93 for the week. The company, which makes most of its revenue from selling television advertising, sank to a five-month low Aug. 8 as TNS Global reported audience for its main station shrank.
Analysts’ buy recommendations for CTC plunged to the lowest level since July 2012 this month after it unexpectedly replaced its Chief Executive Officer July 30.