Bloomberg News

Russian Stocks Rise Most in World on Oil, China Manufacturing

July 01, 2009

Russia’s Micex Index (INDEXCF) rose the most among world stock markets, led by commodity producers, after oil prices advanced and China’s expanding manufacturing supported commodity prices.

OAO Gazprom, the world’s biggest natural-gas supplier, jumped 6.3 percent, while OAO Lukoil (LKOD), the country’s second- biggest crude producer, added 3.3 percent. OAO GMK Norilsk Nickel, Russia’s biggest mining company, advanced 5 percent. The 30-stock Micex Index rose 4.2 percent to 1,012.48 at the close in Moscow, the biggest gain among equity benchmarks tracked by Bloomberg worldwide.

Oil rose as high as $71.85 a barrel, and traded up $1.24 at $71.13 as of the close of equity markets in Moscow. China’s manufacturing expanded for a fourth month as a $585 billion stimulus plan and record bank lending revive the world’s third- largest economy.

“With oil showing signs of breaking through $70 a barrel, or at least stabilizing around that level, some investors are likely moving to add to their positions, especially after the recent correction gave them a much better entry point,” said Ron Smith, head of research at Alfa Bank in Moscow.

Russian stocks entered a bear market this month, under the most common definition, after the Micex fell more than 20 percent in three weeks from this year’s high on June 1. The index is still up 63 percent this year.

Lukoil rose 3.3 percent to 1,424.99 rubles on the Micex Stock Exchange, its biggest advance in a week. Gazprom, Russia’s biggest publicly traded company, increased 6.3 percent to 165.95 rubles.

Gazprom to Benefit

Gazprom will probably rise more than other stocks in the second half of the year as funds buy more shares in line with benchmarks and European consumers accumulate natural gas before winter, UralSib Financial Corp. said.

The average Russia portfolio is only 24 percent invested in Gazprom even though the world’s biggest natural-gas producer has a 32 percent weighting in the benchmark MSCI Russia Index, UralSib said in a report today, citing its estimates and data from Emerging Portfolio Fund Research. Russia funds are 9.1 percent invested in OAO Sberbank, Russia’s biggest bank, even though the stock makes up only 7.7 percent of the index.

“Funds are going to have to rebuild their portfolios in Gazprom as they did with Sberbank in the first half of the year,” Chris Weafer, chief strategist at UralSib, said by telephone from London. “We’re going to see a switch from Sberbank into Gazprom.”

Norilsk

Norilsk Nickel climbed 5 percent to 2,964.10 rubles. Copper added 3.7 percent to $5,150 a metric ton on the London Metal Exchange as China’s Purchasing Managers’ Index rose from May to June. Nickel also advanced.

“Everyone was anticipating seasonally weak China PMI, but the Chinese did it the other way around,” said Constantin Demchenko, head of trading at Everest Asset Management in Moscow.

Russia’s manufacturing industry contracted last month at the slowest pace since September as stronger domestic demand offset falling export orders and companies cut jobs at a slower rate, VTB Capital said.

The ruble was little changed against the dollar and fell 0.4 percent to 43.9412 to the euro as of the end of regular trade at 5 p.m. in Moscow. Russia’s 50-stock RTS Index slipped 0.9 percent to 977.94 after gaining 3.7 percent 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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