Bloomberg News

Goldman Buoys VimpelCom, Yandex on Economy Bet: Russia Overnight

January 12, 2012

Jan. 12 (Bloomberg) -- VimpelCom Ltd. and Yandex NV, climbed as Goldman Sachs Group Inc. upgraded the companies on expectations the Russian economy will weather a global slowdown better than other nations with greater exposure to Europe.

Futures expiring in March on the dollar-denominated RTS index also gained, adding 0.3 percent to 144,885 in U.S. trading and the Bloomberg Russia-US 14 Index of Russian stocks traded in New York reached the highest level in more than a month. The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, rose 0.4 percent to $28.19, the highest since Dec. 7.

The world’s largest energy exporter is less vulnerable to slower European growth than Poland, Hungary and the Czech Republic given its lower financial exposure to the region and “stable” macroeconomic environment, Goldman analysts wrote in a research report e-mailed yesterday. Russian retail sales grew at the fastest pace since 2007 last year and the economy expanded 4.8 percent in the third quarter, compared with 4.2 percent in Poland and 1.4 percent in Hungary.

“While most investors are on the sidelines waiting to see what happens with Europe and the U.S., Russians are spending more, which is a positive for the domestic economy,” Luis Saenz, chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie Financial Corp., said by phone in New York yesterday. “Domestic consumption will be a key driver, along with the old standbys of oil and gas, for Russian equities in 2012.”

‘Best Buy’

Yandex, operator of Russia’s most popular Internet search engine, climbed the most since Dec. 23 after Goldman, the fifth- biggest U.S. bank by assets, raised its recommendation on the stock to “buy” from “neutral.” Analysts including Moscow- based Alexander Balakhnin listed the company as one of Goldman’s “best buy ideas” in the European media and telecommunications industry. Shares gained 1.8 percent to $19.20 in New York.

VimpelCom, Russia’s second-biggest mobile-phone operator, gained for a third day after its rating was raised to “neutral” from “sell” on speculation the stock may benefit from a deal to sell a stake in its Algerian joint venture to the nation’s government, the Goldman report said. VimpelCom advanced 1.7 percent to $10.35 in U.S. trading, the highest level in more than a month.

American depositary receipts of OAO Mobile TeleSystems, Russia’s largest mobile-phone operator, led gains in the Bloomberg Russia-U.S. 14 index yesterday, adding 3.4 percent to $16.27, a five-week high. Goldman reiterated its “buy” recommendation on the stock and also included it in the “best buy ideas” list.

Arbitrage Opportunity

The advance widened the ADR’s premium to the company’s Moscow shares to $3.74, 33 cents off a two-year high reached on Jan. 5. MTS’ stock on Russia’s ruble-denominated Micex fell 1.9 percent to 198.94 rubles yesterday, the equivalent of $6.27. One ADR equals two ordinary shares.

The Bloomberg Russia-U.S. 14 index climbed for a third day, gaining 0.4 percent to 96.34, the highest level since Dec. 5. The RTS Volatility Index, which measures expected swings in the index futures, dropped for the second time in three days, falling 0.7 percent to 41.32 points. United Co. Rusal, the world’s largest aluminum producer, dropped 1 percent to HK$5 in Hong Kong trading as of 11:59 a.m. local time.

CTC Media Inc., a U.S.-listed Russian television network that was the second-worst performer on the Bloomberg Russia-U.S. 14 index last year, fell the most this year. Goldman cut its rating on the stock to “neutral” from “buy,” citing a decrease in audience share and slowing advertising revenue. The New York-based bank also reduced CTC’s 12-month target price to $12.30 from $13.60. The stock dropped 1.1 percent to $9.15.

German Economy

The Standard & Poor’s GSCI Spot Index of commodities declined 0.7 percent to 663.49 as oil prices fell after a U.S. government report showed crude and fuel inventories climbed more than expected and concern mounted that a contracting German economy will drag Europe into a recession. Nickel also declined, losing 0.3 percent to $19,450 a ton on the London Metal Exchange.

Crude for February delivery declined 1.3 percent to settle at $100.87 a barrel on the New York Mercantile Exchange while Brent oil for February settlement dropped 0.9 percent to $112.24 on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, added 0.2 percent to $111.34, the highest level in a week.

OAO Gazprom, the world’s biggest natural gas exporter, increased its reserves of the resource by 686 billion cubic meters last year, 34 percent more than it produced, Russia’s RIA Novosti newswire reported yesterday, citing the Moscow-based energy producer. Gazprom ADRs climbed 0.5 percent in New York to $11.33, while Moscow-traded shares of Russia’s biggest company slipped 0.7 percent to 178.17 rubles, or the equivalent of $5.62. One ADR represents two ordinary shares.

The RTS index in Moscow declined for the first time in four days, dropping 1.2 percent to 1,452.69, and the 30-stock Micex lost 0.8 percent to 1,465.47.

--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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