Bloomberg News

Russian Stocks Advance, Led by Gazprom; Seventh Continent Jumps

May 06, 2009

Russia’s Micex Index (INDEXCF) climbed to a seven-month high, led by OAO Gazprom, after Morgan Stanley said average domestic natural-gas prices will rise more than government announcements suggest.

OAO Seventh Continent, a Moscow-focused grocery store chain, jumped 30 percent for the second day on speculation France’s Carrefour SA will buy a controlling stake.

The 30-stock Micex advanced 2 percent to 976.16 at 1:22 p.m. in Moscow, heading for its highest close since Oct. 2. The RTS Index (RTSI$) added 1 percent to 880.06, and the dollar-denominated Russian Depositary Index, a measure of global depositary receipts trading in London, increased 0.9 percent.

The underlying mathematics shows the average Russian domestic gas price over 2010 will increase at least 15.3 percent from the 2009 average, London-based Morgan Stanley analyst Matthew Thomas wrote in a research note. Some investors may be “alarmed” by an Economy Ministry proposal indicating gas prices will rise by “only” 5 percent next year, according to the note dated today.

“We continue to prefer the Russian gas names, both Gazprom and Novatek, over the Russian oils,” he wrote. Russia has sought to equalize domestic gas prices with more expensive European export gas prices, not including transit costs, by 2011.

Gazprom, the world’s biggest natural-gas producer, advanced 3.6 percent to 166.99 rubles, heading for a third day of gains totaling 13 percent. OAO Novatek, the second-largest gas producer in Russia, rose 2.4 percent to 117 rubles.

Gazprom yesterday advanced while shares of oil companies OAO Rosneft and OAO Lukoil declined on speculation the stock will catch up with the oil producers.

Seventh Continent

Crude oil rose 0.7 percent to $54.21 a barrel today after earlier sinking as much as 0.5 percent. Rosneft, Russia’s biggest oil producer, added 1.6 percent to 180.86 rubles, while Lukoil climbed 1.8 percent to 1,535.76 rubles.

Seventh Continent jumped to 414.39 rubles, a gain of 30 percent, the second straight day it advanced to the maximum daily limit allowed for some shares on the Micex Stock Exchange.

“The only explanation for the stock’s gains in the past two days is the rumor for its possible acquisition by Carrefour,” said Mikhail Krasnoperov, analyst at Troika Dialog in Moscow, by telephone. “If it were to occur, the acquisition would make Seventh Continent’s financial problems disappear.”

Aeroflot

Carrefour signed a preliminary agreement to buy 75 percent of Moscow-based Seventh Continent and 95 percent of its MCapital unit, which controls most of the Moscow grocery chain’s assets, Kommersant reported yesterday, citing unidentified bankers.

Helene Saint-Raymond, a spokeswoman for Carrefour, declined to comment on the Kommersant report. Vlada Baranova, a spokeswoman with Seventh Continent, yesterday said the Russian retailer didn’t know anything about a takeover agreement.

OAO Aeroflot, Russia’s biggest airline, retreated 2.1 percent to 34.38 rubles, its first decline in five days. The passenger number in March fell 22 percent to 2.67 million from 3.41 million a year earlier, the civil aviation agency Rosaviatsia said yesterday.

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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