Bloomberg News

RTS Futures Fall as European Confidence Drops: Russia Overnight

January 09, 2012

Jan. 9 (Bloomberg) -- Russia’s stock futures fell as Euro- area consumer confidence dropped to a two-year low, oil declined and a former finance minister’s call for government opponents to unify raised prospects for new protests.

Russia’s stock futures on the dollar-denominated index expiring in March slipped 0.1 percent on Jan. 6 while the Bloomberg Russia-US 14 Index of Russian companies traded in New York lost 0.5 percent to 92.91, paring its weekly gain to 2.6 percent. American depositary receipts of OAO Gazprom, the world’s largest natural gas producer, retreated to a one-week low, and OAO Mechel, the Russian coal producer that exports to European steelmakers, fell for a second day.

Economic confidence in Europe, Russia’s largest trading partner, fell to a two-year low, a sign regional demand may weaken if the debt crisis doesn’t ease. Former Finance Minister Alexei Kudrin on Jan. 6 urged protestors contesting last month’s parliamentary vote to pressure the government for new elections. Prime Minister Vladimir Putin is seeking to return to the presidency in the March 4 vote.

“For Russia, Europe remains a question mark and then there are also the country’s own political uncertainties,” John-Paul Smith, the London-based emerging-market strategist at Deutsche Bank AG, said in an interview. “Russian stocks are cheap, but there are structural impediments for translating that cheapness into tangible shareholder returns. Investors are waiting to see what policies are implemented after the election.”

Index Valuation

Capital flight from Russia may exceed $85 billion in 2011, acting Finance Minister Anton Siluanov said in Moscow on Dec. 6, 21 percent more than an earlier forecast from the central bank for $70 billion. Russia’s Micex Index trades at 5.4 times analysts’ earnings estimates for member companies, the lowest among the largest emerging markets including India, Brazil and China.

Deutsche Bank has rated Russian equities “underweight” for almost a year, Smith said.

United Co. Rusal, the world’s largest aluminum producer, dropped 3.9 percent to HK$4.46 in Hong Kong trading as of 11:58 a.m. local time. The MSCI Asia Pacific Index fell 0.5 percent today after India’s prime minister cut his economic growth forecast and Australian retail sales missed estimates.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, slipped 0.4 percent to $27.08 on Jan. 6, bringing its gain for the week to 1.6 percent.

Gazprom ADRs fell 1 percent to $11, paring a weekly gain to 3 percent and leaving the receipts at a 0.4 percent discount to the shares traded in Moscow. The shares have fallen 6.5 percent since the Dec. 4 parliamentary elections that sparked the biggest demonstrations in Putin’s 12 years in power as Russians protested over alleged vote fraud.

Yandex Drops

Mechel, which obtained 19 percent of its 2010 revenue from Europe, lost 1.5 percent to $9.05 in New York, trimming its weekly advance to 6.5 percent. The receipts closed at a 2.4 percent discount to shares in Moscow.

Yandex NV, the operator of Russia’s most popular Internet search engine, fell the most on the Bloomberg Russia-US 14 index on Jan. 6, dropping 3.5 percent to $18.61, extending its decline for the week to 5.5 percent. Liveintenet.ru, an Internet-service provider and researcher, said Yandex’s share of the Russian Internet search market declined in the seven days ended Jan. 6 to a daily average of 59.5 percent, compared with 60.3 percent in the previous seven days.

Polyus Gold International Ltd., the country’s biggest producer of the metal, gained 2 percent to $3.04 in New York, extending the advance last week to 3.1 percent. Gold and shares of gold producers will outperform the broader mining industry in the first half of 2012, Julien Garran, an analyst at UBS AG, said in Jan. 5 report.

Russian Holidays

The RTS Index in Moscow gained 0.6 to 1,423.70 to extend its weekly advance to 3 percent, while the 30-stock Micex Index added 0.4 percent to 1,440.60 for a 2.7 percent increase last week. The RTS Volatility Index, which measures expected swings in the index futures, dropped 8 percent to 37.89.

Moscow markets were open last week even as the country observed a public holiday that extends until Jan. 10. Russia’s Orthodox Christians, a majority in the country of 143 million, celebrated Christmas on Jan. 7.

An index of executive and consumer sentiment in the 17- nation euro area fell to 93.3 in December, the European Commission in Brussels said on Jan. 6, as factory orders in Germany, the region’s largest economy, dropped 4.8 percent in November, the most in almost three years, according to the Economy Ministry in Berlin.

Crude for February delivery on the New York Mercantile Exchange declined 0.5 percent to $101.01 a barrel in electronic trading today, following a 0.3 percent drop on Jan. 6. Brent oil for January settlement increased 32 cents to $113.06 a barrel on the London-based ICE Futures Europe exchange.

Ruble Strengthens

The ruble strengthened for the first time in three days against the dollar, extending its weekly gain as Urals crude oil, Russia’s chief export earner, advanced. The Russian currency rose 0.2 percent at 31.98 per dollar and advanced 0.5 percent last week. Urals crude rose 0.8 percent to $111.23 a barrel as tensions over Iran spurred bets supplies of the commodity may fall.

The Micex’s 2.7 percent gain last week compares with a 3.3 percent advance for Brazil’s Bovespa index, which trades at 9.2 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 8.9 times estimated earnings, and the BSE India Sensitive Index has a ratio of 13.8.

--Editors: Brendan Walsh, 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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