Bloomberg News

Russian Stocks Climb as Investors Seek Bargains; Gazprom Rises

November 14, 2008

Russian stocks climbed after crude oil rose overnight and investors sought cheap shares amid speculation the government will support the equity market.

The 30-stock Micex Index climbed 1.2 percent to 605.70 at 1 p.m. in Moscow, its first gain since Nov. 10, leaving the gauge with a 17 percent loss so far this week. The dollar-denominated RTS rose 5.4 percent to 653.06 today. The Russian Depositary Index (RDXUSD), a measure of Russian GDRs trading in London, advanced 5.6 percent to 801.40.

Crude oil climbed $2.08 to $58.24 a barrel overnight in New York before slipping 23 cents in after-hours trading today. The MSCI Russia Index (MXRU), dominated by oil and gas producers, is trading at 3.7 times earnings, compared with almost 15 times earnings a year ago, according to data compiled by Bloomberg.

``Russia is a steal at these prices,'' said Marina Akopian, who has been buying Russian shares for six weeks at the Hexam EMEA Absolute Return Fund in London. ``It's a combination of new, smart money coming in, companies buying back their own stock and maybe the government, too.''

The Micex Index has fallen 68 percent this year as oil prices fell from a July high, Russia fought a war with neighboring Georgia and equity sales by leveraged investors exceeding margin requirements pushed down shares.

OAO Gazprom, the world's biggest natural-gas producer and Russia's biggest publicly traded company, today climbed 4.1 rubles, or 3.9 percent, to 111.50 rubles on the Micex Stock Exchange, its second gain this week.

Devaluation Impact

OAO Surgutneftegaz, the country's fourth-biggest oil producer, added 0.507 ruble, or 3.7 percent, to 14.279 rubles. Goldman Sachs Group Inc. said in a report that earnings of energy exporters such as Gazprom and Surgut will benefit the most from an expected devaluation of the Russian ruble. The currency may fall 18 percent in 12 months against the dollar-euro basket that the central bank uses to manage its fluctuations, Goldman said.

OAO Aeroflot, Russia's biggest airline, sank 2.4 rubles, or 4.4 percent, to 51.97 rubles, the worst performer in the Micex Index (INDEXCF) today. Russian Technologies Corp. and Moscow Mayor Yuri Luzhkov are seeking to remove Aeroflot's right to collect overflight fees for aircraft flying over Russian territory, Vedomosti reported, citing Moscow Deputy Mayor Vladimir Silkin.

``The removal of the flyover fees would substantially decrease earnings, putting the company at a loss in 2008,'' Alfa Bank said in a note to investors.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net.


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