Mechel Discounted as Futures Drop on U.S. Data: Russia Overnight
Russian equity futures slipped and coal producer OAO Mechel traded at a discount to its Moscow shares for the first time in nine days, as worse-than-forecast U.S. housing data crimped the outlook for the global economy.
Futures expiring in March on Moscow’s dollar-denominated RTS (RTSI$) index dropped 0.5 percent to 156,500 in U.S. trading yesterday, as the Bloomberg Russia-US 14 Index of Russian companies traded in New York slid 0.2 percent to 103.58. OAO Mechel (MTLR), the best performing stock on the index this year, tumbled the most in two weeks, trading at a discount over shares on Moscow’s Micex index for the first time since Jan. 17.
Oil and other commodities pared gains as a government report showed U.S. home sales dropped 2.2 percent in December, after all but six of 75 economists surveyed by Bloomberg predicted they would increase. Energy sales make up about 17 percent of Russia’s gross domestic product and the country is home to the world’s largest gas and nickel producers, making it dependent on global demand for resources.
“You can’t blame people for booking some profits in an environment where a lot of unresolved problems remain,” Ian McCall, a managing partner at Quesnell Capital SA, an emerging markets investment adviser in Geneva with 100 million Swiss francs ($109 million) under management, said by phone yesterday. “There is still no sustainable solutions in the long term. As an investor, can you sleep easy on that? No, you can’t.”
The RTS Volatility Index (RTSVX), which measures expected swings in the index futures, gained for the first time in three days, rising 2 percent to 33.45 points. The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, rose for the fourth day, adding 0.6 percent to $30.27.
Talks over a debt swap to prevent Greece from defaulting resumed yesterday as international policy makers argue over the mounting cost of the rescue. European finance ministers have insisted bondholders take bigger losses on their Greek bonds. The debt crisis bolsters concern a global recession is looming, McCall said. Europe, embroiled in the deficit crisis for the past two years, is Russia’s largest trading partner.
Crude oil for March delivery gained 0.3 percent to $99.70 yesterday, after earlier climbing as much as 2 percent on the New York Mercantile Exchange. Brent oil for March settlement rose 0.9 percent to end the session at $110.79 on the London- based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, gained 0.3 percent to $109.68, its smallest advance since Jan. 17.
The Standard & Poor’s GSCI Spot Index of commodities rose 0.5 percent to 664.92, paring an earlier jump of as much as 1.5 percent.
Mechel, Russia’s largest producer of coal for steelmaking, lost 71 percent in U.S. trading last year to become the biggest decliner on the Bloomberg Russia-U.S. 14 index. American depositary receipts of the Moscow-based miner fell 4.7 percent to $10.93 in New York yesterday, trimming this year’s advance to 29 percent and pushing the ADRs 75 U.S. cents below the company’s stock traded on Russia’s ruble-denominated Micex index.
Mechel gained 6.2 percent to 353 rubles in Moscow yesterday, or equivalent of $11.69. One depositary receipt represents one ordinary share of Mechel.
ADRs of state-controlled OAO Gazprom (OGZPY), the world’s largest producer of natural gas, declined 1.5 percent to $12.16, the second-worst performer on the Bloomberg Russia-U.S. 14 measure after Mechel yesterday. The stock trades at 3.4 times its most recent earnings, compared with 6.07 for competitor BP Plc, according to data compiled by Bloomberg.
“The market is so cheap, so let’s buy Gazprom,” McCall said. “This is the kind of vision some investors have on Russian equities and it has been driving market higher.”
On the Micex, Gazprom rose 0.1 percent to 185.32 rubles, or $6.11. One ADR is equal to two ordinary shares.
Yandex NV (YNDX), operator of Russia’s most popular Internet search engine, gained the most on the Russia-U.S. 14, adding 5.6 percent to $20.89 in New York, the highest level since Dec. 7.
The Hague, Netherlands-based company said its monthly audience rose 1.8 percent in December from November and almost doubled from May 2008, according to data on its website.
Yandex’s “audience growth is in line with past experience for the month of December and in line with Mail.ru’s,” said Jean Kaplan, an analyst at HSBC Holdings Plc in London, referring to Mail.ru Group Ltd., Russia’s largest Internet company and an investor in Facebook Inc.
Polyus Gold International Ltd. (PLGL), Russia’s largest gold miner, gained 1.2 percent to $3.27 in New York, the highest level since Jan. 18. The company may merge with Polymetal International Plc (POLY) to create the world’s ninth-biggest producer of gold.
Talks on a possible union have only taken place between the company’s owners and management wasn’t included, two people with knowledge of the matter said, declining to be named until a decision on whether to pursue negotiations is made.
Anton Arens, a Polyus spokesman, and Andrey Abashin, a Polymetal representative, declined to comment, as did Andrey Belyak, a spokesman for Onexim Group, the holding company of billionaire Mikhail Prokhorov, part-owner of Polyus.
OJSC Polyus Gold stock in Moscow fell 1.1 percent to 1,021.10 rubles in Moscow, or equivalent of $33.63.
The Micex has gained 8 percent this year and trades at 5.8 times analysts’ earnings estimates for member companies. That compares with an 11 percent gain in 2012 for Brazil’s Bovespa (IBOV) index, which trades at 10 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index (SHCOMP) trades at 9.5 times estimated earnings, and the BSE India Sensitive Index (SENSEX) has a ratio of 15.
United Co. Rusal, the world’s largest aluminum producer, rose 2.6 percent to HK$6.23 in Hong Kong trading as of 10:54 a.m. The MSCI Asia Pacific Index gained 0.3 percent today.
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