Micex Rises as Surgut Prefs Trade at Biggest Premium Since 1999Vladimir Kuznetsov
Stocks climbed for a second day after Russia called for fresh talks to resolve the crisis in Ukraine and the ruble’s decline stoked bets on a higher dividend for preferred shares of oil producer OAO Surgutneftegaz.
The Micex Index rose 0.9 percent to 1,330.77, extending the strongest gain in more than two weeks yesterday. Preferred shares of Surgut rose for the third day, adding 0.6 percent to 25.209 rubles, the biggest premium to its ordinary stock since 1999, Bloomberg data show. The ordinary shares increased 0.3 percent to 25.027 rubles.
The slumping ruble has boosted the value of Surgut’s dollar cash pile, bolstering the company’s income and benefitting holders of the preferred shares, who typically receive a dividend three times that for the ordinary stock, according to Citigroup Inc. analysts Ronald Paul Smith and Alexander Bespalov. Russian Foreign Minister Sergei Lavrov and European Union officials discussed yesterday a new meeting after a deal to solve the crisis agreed to last month unraveled.
“The market is still under pressure from geopolitical factors, and clarity is unlikely until the end of May,” Vladimir Vedeneev, chief investment officer at Raiffeisen Capital Asset Management in Moscow said.
Surgut’s net income in the first quarter was already equal to about 50 percent of its 2013 full-year profit as the ruble’s decline increased the value of its dollar holdings, Vedeneev said. The ruble has retreated 7.4 percent this year against the dollar, the worst performance among 24 emerging-market currencies tracked by Bloomberg after Argentina’s peso.
Shares on the Micex are valued at 0.65 times net assets, or book value, after last week dropping to the cheapest level since 2009, data compiled by Bloomberg show.
John-Paul Smith, the Deutsche Bank AG strategist who predicted Russia’s 1998 stock market crash and has been bearish on the country for more than three years, says investors are overreacting to the conflict in Ukraine.
“People now appear to be saying get out at any price, and that is perversely a good sign,” Smith said in a telephone interview from London yesterday. “You will get a recovery at some point.”