Bloomberg News

Russian Stocks Rise on Ruble, Crude Prices, Oil-Tax Exemption

February 13, 2009

Russian stocks rose, capping the third weekly advance, as a rally in the ruble, rising oil prices and a plan to make some oil exports tax-exempt boosted investor confidence in the country’s assets.

OAO Rosneft, Russia’s biggest oil producer, and OAO Lukoil, the second-biggest, led gains as crude jumped 5.8 percent and the government agreed to set a zero export duty on oil produced in eastern Siberia.

The Micex Index (INDEXCF) rose 6 percent to 732.21, extending the weekly gain to 11 percent. The RTS Index added 2 percent to 624.21 today. Russian equity funds had their biggest weekly inflows since October, Bank of America Corp. said today.

Crude climbed 5.8 percent to $35.95 a barrel in New York. The ruble is headed for its strongest week against the dollar since 1998, with a gain of 4.6 percent, as the central bank steps up defense of the currency by raising its interest rate on loans to banks secured with bonds or other collateral through repurchase auctions and pushing companies to convert foreign-currency stockpiles into rubles.

“The ruble strength is definitely helping stocks,” said Kevin Dougherty, portfolio manager at Pharos Financial Group in Moscow. Russia’s currency dropped 32 percent against the dollar since the end of July.

‘Dominant Theme’

“Support for the ruble has been the dominant theme for stocks through the week,” said Thomas Mundy, strategist at Renaissance Capital in Moscow.

Rosneft added 6.7 percent to 130.09 rubles on the Micex Stock Exchange, its fourth gain this week. Lukoil climbed 4.8 percent to 1,267.44 rubles.

Russia’s government plans a zero export duty on oil produced in eastern Siberia as it considers a new tax model for the industry, Energy Minister Sergei Shmatko said late yesterday.

“If the tax break were to be introduced this year it could lead to approximately 10 percent growth in Rosneft’s 2009 earnings,” Citigroup Inc. said in a note today.

OAO Uralkali soared 16 percent after Russia’s biggest potash producer said it would compensate the government for damage resulting from a 2006 flood at one of its mines. The payment into the Perm regional budget will be made “as soon as possible,” Alan Basiev, a spokesman for the Berezniki, Russia-based company, said today in an e-mailed response to questions. Uralkali will sign an accord with the Ministry of Finance and the local government, he said.

“No other fines are being mentioned so far, and this is kind of a temporary relief,” said Alexander Zakharov, co-head of equities at the Metropol brokerage in Moscow. “There is no final relief yet.”

OAO Polyus Gold, Russia’s largest gold producer, jumped 11 percent to 1,124.42 rubles. A decline of 20 percent yesterday in Polyus “looks to be overdone,” Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, wrote in a note today. Three investment banks tried to sell a 10 percent stake in Polyus Gold in London yesterday, Vedomosti reported, citing unidentified bankers.

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

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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