Bloomberg News

RTS Futures Fall on OPEC as CTC Media Slides: Russia Overnight

December 15, 2011

Dec. 15 (Bloomberg) -- Russian stock futures fell as OPEC agreed to raise limits on production, driving down the price of oil, the nation’s biggest export earner. CTC Media Inc. slid the most in five weeks on reports its chief executive officer is leaving.

Futures expiring this month on Moscow’s dollar-denominated RTS index dropped 1 percent to 135,440 in U.S. trading, and an index that measures volatility in the futures climbed for a third day. CTC Media, a television network listed in the U.S., was the biggest decliner on the Bloomberg Russia-US 14 index of Russian stocks traded in New York after a newspaper reported Chief Executive Officer Anton Kudryashov will exit the company to head cell-phone provider VimpelCom Ltd.

Crude plunged the most since September as the Organization of Petroleum Exporting Countries agreed to raise its production quota for the first time in three years amid rising exports from postwar Libya. Oil and gas sales made up almost 50 percent of Russian government revenue this year, equal to about 10 percent of gross domestic product, the Finance Ministry said yesterday.

Oil falling is “definitely not a good backdrop for Russia,” Tom Mundy, chief strategist at Otkritie Financial Corp. in Moscow, said by phone yesterday. “The equity market is pricing very aggressively the uncertainty emanating from oil prices because we don’t know what’s happening in Europe, the U.S. or China.”

Russia’s benchmark Micex index is the cheapest of the 21 emerging market measures tracked by Bloomberg, trading at 4.7 times estimated earnings for member companies next year, compared with 10 for Brazil’s Bovespa and 11 for China’s Shanghai Composite Index.

Crude ‘Floor’

Oil has provided a “floor” for Russian stocks this year, Mundy said, with the Micex falling 19 percent in 2011 while Brent, a blend of oil used to price Russia’s chief Urals Crude mix, added 11 percent.

The RTS Volatility Index, which measures expected swings in the index futures, added 0.9 percent to 53.10 points yesterday, the highest level in almost a week. The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, slipped 0.2 percent to $26.06, falling for a fifth day.

Crude traded in New York lost 5.2 percent to settle at $94.95 a barrel on the New York Mercantile Exchange, a five-week low. OPEC decided to boost its production ceiling to 30 million barrels a day, compared with actual November production of 30.37 million barrels a day from member nations. The target replaces a previous limit for 11 OPEC nations, excluding Iraq, of 24.845 million.

CTC Media CEO

Brent declined 4.1 percent to $105.02 on the London-based ICE Futures Europe exchange, while Urals crude slipped 4.5 percent to $104.03.

Moscow-based CTC Media retreated 3.4 percent to close at $8.86 in New York, the lowest level since Oct. 3. Russia’s RBC Daily newspaper reported that CEO Kudryashov will leave to head VimpelCom Ltd., a Russian mobile-phone company with more than 200 million customers worldwide. CTC’s board will decide today whether to approve Chief Financial Officer Boris Podolsky as acting CEO, according to a separate RBC Daily report.

CTC’s press secretary, Viktoria Bakaeva, didn’t reply to an e-mail sent after hours in Moscow seeking confirmation of the reports. Elena Prokhorova, head of VimpelCom’s media service, didn’t return calls to her mobile and office numbers made after hours in Moscow.

Kudryashov is known for being focused on improving operating results and increasing efficiency, said Alexander Vengranovich, an analyst at Otkritie in Moscow.

‘Unresolved Problems’

Amsterdam, the Netherlands-based VimpelCom’s third-quarter profit plunged 79 percent to $104 million as the company increased spending and serviced debt. CTC’s net income declined 33 percent in the three months to Sept. 30 to $16.4 million, the network said on Nov. 9.

American depositary receipts, or ADRs, of VimpelCom dropped 1.4 percent to $9.61, declining for a seventh day in New York trading.

“We stick to our view that Kudryashov’s departure will leave CTC Media with a mass of unresolved problems” including “weak audience share” and a “lack of in-house production,” Anastasia Obukhova, an analyst in Moscow at VTB Capital, the investment banking arm of Russia’s second-largest bank, wrote in a report e-mailed yesterday.

OAO Mechel, Russia’s largest coal producer for steelmakers, slipped 1 percent to $9 in New York trading after the company’s shares in Moscow dropped 3.8 percent to 293.80 rubles, or the equivalent of $9.22. One Mechel ADR represents one ordinary share.

Yandex Slides

Mechel is scheduled to release its third-quarter earnings results today in Moscow. The company will report sales of $3.30 billion in the three months to Sept. 30, according to the average estimate of eight analysts surveyed by Bloomberg. Mechel reported second-quarter sales of $3.47 billion.

Yandex NV, the operator of Russia’s most popular Internet search engine, declined for a fifth day, sliding 3.2 percent to $17.89, the lowest level since the stock started trading in May. Yandex has tumbled 54 percent since then.

Concern that the company is losing “market share” to competitors such as Google Inc. and Russia’s Mail.ru has pushed the stock down “over the past several days,” Cindi Profaca, an analyst at IPO Financial in Millburn, New Jersey, said by e-mail yesterday.

Yandex’s share of the Russian search market declined to 60.7 percent in the week through Dec. 11, from 60.9 percent the previous week, Liveintenet.ru, an Internet-service provider and researcher, reported on Dec. 12.

Russian Prime Minister Vladimir Putin is scheduled to hold his annual live TV event today in Moscow, answering questions phoned in from around Russia. Thousands have taken to the streets of the capital and other Russian cities in protest against Dec. 4 parliamentary elections that observers say were plagued by violations including ballot stuffing.

--Editors: Emma O’Brien, Marie-France Han

To contact the reporters on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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