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Russian Stocks Climb as Strategists Recommend Gazprom for 2008

December 18, 2007

Russian stocks rose for the first time in four days, led by OAO Gazprom as two investment banks highlighted Russia's biggest company as a top pick among Russian stocks in 2008.

OAO Lukoil declined after Troika Dialog said the oil producer may have to sell stock or bonds to pay its 2007 dividend.

The ruble-denominated Micex Index (INDEXCF) added 1.1 percent to 1,908.63 as 20 stocks advanced, nine retreated and one was unchanged. The index has gained 13 percent in 2007. The dollar- denominated RTS Index (RTSI$) increased 0.8 percent to 2,269.09 today.

Moscow-based UralSib Financial Corp. and Renaissance Capital said in research reports that investors should buy shares of state-run Gazprom, the world's biggest natural-gas producer, because the company will benefit from government spending and an improved investment climate. President Vladimir Putin yesterday agreed to accept the post of prime minister if Gazprom Chairman Dmitry Medvedev is elected president next year.

``The lifting of electoral uncertainty and the need for investment bring the interests of the Kremlin and the interests of investors into closer alignment,'' Roland Nash, chief strategist at Renaissance, wrote in a note to investors today. ``This could, in particular, greatly help the valuations of state-dominated companies.''


Gazprom climbed 2.2 percent to 348.40 rubles on the Micex Stock Exchange. OAO Novatek, a gas producer part-owned by Gazprom, also rose 2.2 percent, to 183.28 rubles.

Lukoil, Russia's second-biggest oil producer, fell 1 percent to 2,133.75 rubles. Moscow-based Troika cut its recommendation on the shares 10 percent to $94 (2,324 rubles), saying the company's ``weak'' cash flow means it may have to sell new stock or debt to raise money to pay dividends.

``More leverage or a higher share count should and will be taken negatively by the market,'' Troika analysts Oleg Maximov and Valery Nesterov wrote in a note to investors.

Russian banks climbed with European financial shares after central bankers added a record $500 billion to the financial system to break the gridlock in the credit markets. OAO Sberbank, Russia's biggest bank, added 1.3 percent to 105.18 rubles. VTB Group, the bank that went public in the world's biggest initial public offering this year, climbed 3.8 percent to 12.74 kopeks.

Polyus Gold

OAO Polyus Gold, the biggest Russian gold producer, added 1.8 percent to 1,078.75 rubles. The company said in a statement that it will produce 32,000 more ounces of gold in 2007 than previously planned.

OAO Uralkali, Russia's second-biggest potash producer, added 2.5 percent to $30.74 at 3:37 p.m. in London. Renaissance Capital initiated coverage of the stock with a ``buy'' recommendation.

Ukrainian stocks advanced after the country's lawmakers backed the return of former Prime Minister Yulia Timoshenko. The PFTS Index gained 0.8 percent to 1,133.66, as 12 stocks advanced, four retreated and two were unchanged. Concern Stirol, a fertilizer producer, and pipemaker Interpipe Ltd. led the gains.

AO Alliance Bank, Kazakhstan's biggest consumer lender, fell for an 11th day, slipping 2.6 percent to $5.55 in London. Moscow- based Alfa Bank cut its price estimate for the bank 15 percent to $7, saying the bank has ``suffered from the global turmoil'' in the credit markets.

To contact the reporter on this story: William Mauldin in Moscow at

To contact the editor responsible for this story: Daniel Hauck at

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