Bloomberg News

Russia Stocks Gain Fourth Day as Vote Loosens Putin Party’s Grip

December 06, 2011

Dec. 5 (Bloomberg) -- Russian stocks gained, pushing the 30-stock Micex index higher for a fourth day, after crude oil advanced and Prime Minister Vladimir Putin’s grip weakened in parliamentary elections.

The Micex Index added 0.8 percent to 1,517.89 at the 6:45 p.m. close in Moscow after falling as much as 0.4 percent earlier. Steelmakers OAO Severstal and OAO Novolipetsk Steel both climbed more than 2.5 percent. The dollar-measured RTS index rose 0.9 percent to 1,559.28.

Putin’s United Russia will get 238 seats out of 450 in the State Duma, the lower house of parliament, after winning 49.5 percent in yesterday’s election, down from 64 percent in a 2007 vote, the electoral commission said today after 96 percent of the votes had been counted.

“Policy talk from the country’s leadership will most likely be tilted towards addressing the needs of the left-of- centre electorate to move the needle of public opinion for the presidentials,” Alexey Zabotkin, an analyst at VTB Capital in Moscow, wrote in an e-mailed note today. “This is likely to be short-term positive for the consumer.”

Crude futures advanced 1.1 percent to $102.08 a barrel in New York after Italian Prime Minister Mario Monti approved 30 billion euros ($40 billion) of austerity measures yesterday and on renewed hopes of an easing of Europe’s debt crisis. Yields on 10-year Italian bonds dropped 68 basis points, or 0.68 percentage point, to 6.006 percent, heading for the biggest daily fall since Aug. 8.

Putin’s disapproval rating rose to the highest level since he became president in 2000 in opinion polls last month, according to the Levada polling company. Presidential elections are scheduled for March.

Worst Vote

Yesterday’s parliamentary vote was the worst for United Russia since 2003, when the party garnered 37.6 percent. Putin, a former KGB officer, announced in September he would run for a third term as president, swapping jobs with President Dmitry Medvedev, who succeeded him in 2008 because of a constitutional limit on serving more than two consecutive terms.

“A result like this may pressure Putin to accelerate reform,” Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said in an e-mail. “This week, however, market determinants are global.”

The results of yesterday’s elections don’t “change the investment equation” for Russia, Ian McCall, a managing partner at Geneva-based Quesnell Capital SA, which runs the equivalent of about $116 million in emerging-market assets, said in a phone interview yesterday.

“United Russia has given us stability for two terms and we will get a third term of stability,” he said. “The weakening of their position is also a good sign. It is a sign of democracy.”

Slight Positive

Confirmation Putin’s party is still in control should be a “slight positive” for Russian stocks, Mattias Westman, managing director of Prosperity Capital, which calls itself the largest Russia-focused equity investor with about $5 billion under management, said by phone from London yesterday.

Westman likes consumer and energy companies such as OAO Gazprom, the world’s largest natural gas producer, and OAO Magnit, Russia’s largest food retailer. Gazprom gained 0.8 percent to 184.77 rubles, while Magnit rose 1.9 percent, the most since Nov. 30, to 2,842.8001.

Oil, which along with gas makes up about 17 percent of Russia’s economy, climbed to a two-week high on Dec. 2. It had its first weekly gain in three on concern tensions between Iran and the West will threaten shipments from the Organization of Petroleum Producing Countries’ second-largest producer.

Oil Rises

Oil prices in New York have jumped 28 percent this quarter, headed for the best quarter since the three months to June 30, 2009. Urals crude, Russia’s chief export blend, jumped 4.1 percent last week to $110.59. Oil producers OAO Rosneft and OAO Lukoil gained 0.8 percent and 1.3 percent today, respectively.

The Micex has lost 11 percent this year and trades at 5.3 times analysts’ earnings estimates for member companies. The drop compares with a 16 percent slide for Brazil’s Bovespa index, which has a ratio of 10.4 times, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 11.1 times and the BSE India Sensitive at 14.5.

--With assistance from Alex Nicholson in Moscow. Editors: Ash Kumar, Linda Shen

To contact the reporter on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net

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


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