New York ADRs No Match for Moscow Stocks as Yandex Sinks

Russian companies are finding that international stock investors can be more risk-averse than the local crowd.

The Kremlin’s standoff with the U.S. over Crimea pushed down the Bloomberg index of the biggest Russian companies listed in the U.S. 20 percent this year, more than the 9.4 percent slump in the Micex benchmark in Moscow. What’s more, all of the worst performers in the U.S. -- stocks from Yandex NV to CTC Media Inc. and VimpelCom Ltd. -- are companies that opted to list only in New York, forgoing Moscow entirely.

It’s that lack of trading in Moscow, where demand from locals can help anchor the overseas price, that’s caused those stocks to be punished the most, Kazimir Partners and Rye, Man & Gor Securities said.

“They wanted to end being associated with Russia,” Anvar Gilyazitdinov, who manages a $10 million portfolio of Russian stocks at Ryan, Man & Gor, said by phone from Moscow on April 11. “That never happened, as their businesses and assets are still in Russia. Instead, it has worked in an unexpected way: foreign investors turned negative on Russia, while people on the ground look beyond the Ukraine crisis and see value in the oversold stocks.”

Russia’s First Deputy Prime Minister Igor Shuvalov urged companies to delist from overseas stock markets last week, citing concerns about the country’s “economic security,” two days before U.S. Treasury Secretary Jacob J. Lew warned of more sanctions as tensions escalate in eastern Ukraine.

‘Some Buying’

“People on the ground know that the crisis can escalate as Russian troops are at the Ukrainian border and we can’t exclude anything at that point,” Mansur Mammadov, a money manager at Kazimir Partners in Moscow, said by phone on April 11. “Yet there is some buying in the market time to time.”

While the Micex entered a bear market on March 13 as the tension with Ukraine triggered the worst standoff between Russia and the U.S. since the end of the cold war, the measure has rallied 9.1 percent since then. The Bloomberg Russia-US Equity Index has gained 6.8 percent.

Russian stocks traded in Moscow slid 11 percent in May 2012 as police detained hundreds of anti-government protesters following Vladimir Putin’s return to the presidency. That compares with a 22 percent plunge in the measure for the nation’s shares listed in the U.S.

The Micex is the cheapest among 21 developing countries monitored by Bloomberg, trading at 4.5 times estimated earnings, compared with 10.6 for the MSCI Emerging Markets Index. The Micex dropped 1.3 percent to 1,344.86 in Moscow today.

Daily Volume

The average daily volume in 10 of the country’s biggest stocks was 45 percent higher in the U.K. than in Moscow over the past 30 days, according to data compiled by Bloomberg. Companies including Yandex, VimpelCom and CTC Media are only traded on exchanges abroad while OAO Lukoil, OAO Gazprom and OAO Sberbank, among others, have shares listed in Moscow, New York and London.

The Bloomberg Russia-US gauge fell 3.1 percent last week to 82.32. Yandex, Russia’s largest Internet company, dropped 6.5 percent to $28.01, extending its decline for the year to 35 percent. CTC Media sank 2.8 percent to $9.21 for the week, while VimpelCom slid 2.9 percent to $8.30. The stocks retreated more than 33 percent this year.

Igor Ivanov, head of CTC Media’s press service, declined to comment on whether the company considers listing its shares in Moscow.

Micex Listing

Greg Abovsky, vice president for investor relations and corporate development at Yandex said on a Feb. 20 conference call with investors that the “board has weighed the issue and is generally supportive” of a Moscow listing. Ochir Mandzhikov, a spokesman for the company in Moscow, declined to comment further.

VimpelCom, whose Russian subsidiary OAO VimpelCom was delisted from the New York Stock Exchange in 2010, is considering additional listing for the parent company in Europe and has “no concrete plans” on any other listing, Artem Minaev, the Amsterdam-based head of media relations at VimpelCom, said by e-mail on April 11.

The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, fell 1 percent last week to $23.50. The RTS Volatility Index, which measures expected swings in the index futures, dropped 1 percent to 35.18, while RTS stock-index futures expiring in June advanced 0.2 percent to 117,290 in U.S. hours April 11.

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