Bloomberg News

Troika Says Bottoming Ruble Is Buy Signal for Oil, Gold Stocks

January 23, 2009

Russia investors should buy shares of the country’s oil and gold exporters when the ruble bottoms at 36 to the dollar because those companies have most costs in rubles and revenue in the U.S. currency, Troika Dialog said.

“The experience of other devaluations is that the equity market tends to bottom at the same time as the currency,” Troika strategists Kingsmill Bond and Andrey Kuznetsov wrote in a note to investors today.

The central bank yesterday said it’s “finished” expanding the ruble’s trading band against a dollar-and-euro currency basket that it uses to control fluctuations. The new edge of the trading band, at 41 rubles to the currency basket, correlates to 36 rubles to the dollar, assuming the euro-dollar exchange rate remains relatively constant.

“We don’t know yet how the currency will be allowed to move to this level, whether it will be a single move,” the Troika strategists wrote. The decline may happen one or a few days, the report said.

When the ruble falls to 36 per dollar, the central bank may defend the currency and Russian shares will “likely bounce,” Troika said.

Russia’s oldest brokerage recommended OAO Surgutneftegaz, the country’s fourth-biggest oil producer; OAO Tatneft, the oil producer in the Tatarstan region; OAO Gazprom Neft, the oil arm of gas giant OAO Gazprom; OAO Lukoil, the second-largest oil producer; OAO Polyus Gold, the country’s biggest gold producer and OAO Polymetal, a gold and silver producer.

“These are the stocks that stand to benefit most from devaluation due to their ruble costs and dollar revenue, and because their dollar debts are insufficient to outweigh these benefits,” the Troika strategists said.

The ruble traded at 32.9755 to the dollar as of 10:45 a.m. in Moscow.

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

To contact the editor responsible for this story: Gavin Serkin in London at

The Aging of Abercrombie & Fitch
blog comments powered by Disqus