Bloomberg News

Futures Volumes Slide as Vote Concerns Mount: Russia Overnight

January 24, 2012

Jan. 24 (Bloomberg) -- Russia’s stock futures dropped, with the value of traded contracts tumbling 41 percent below their daily average during the fourth quarter of 2011, on concern the Kremlin’s handling of presidential elections in March will further stoke anti-government sentiment.

Futures expiring in March on Moscow’s dollar-denominated RTS index fell 0.6 percent to 151,465 in U.S. trading yesterday. The value of contracts traded sank to $3.08 billion from a daily average of $5.23 billion during the fourth quarter, according to Otkritie Financial Corp. Oil producer OAO Surgutneftegas jumped to an eight-month high in New York as crude rose.

Protesters have taken to the streets of Russian cities since Prime Minister Vladimir Putin’s party retained a parliamentary majority in Dec. 4 elections observers say were marred by ballot box fraud. Grigory Yavlinsky, an opposition presidential candidate, accused Putin yesterday of trying to bar him from the presidential poll to ensure a first-round victory. Putin is vying to return to the presidency for a third term after stepping down because of term limits in 2008.

“The uncertainty created by the protests makes people a little nervous about Russia,” Geoffrey Dennis, a global emerging-markets strategist at Citigroup Inc., said by phone in New York yesterday. “We’re not recommending investors chase Russia at this point because the politics will remain messy.”

The Bloomberg Russia-US 14 Index of Russian companies traded in New York gained 1.1 percent to 100.38 yesterday. Trading volume on the index last week was 23 percent below the average for the final three months of 2011, according to data compiled by Bloomberg.

Russia ETF Climbs

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, advanced 1.3 percent to $29.30. The fund has climbed 9.9 percent since the end of 2011. The RTS Volatility Index, which measures expected swings in the index futures, rose for the first time in six sessions, adding 0.9 percent to 33.41 points.

Daily volumes in RTS futures reached a three-month low on Jan. 3 as investors pulled back from the market, Luis Saenz, chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie, said by phone in New York yesterday. Otkritie manages about 38 percent of futures and options trading on the RTS, according to Saenz.

“Because of the political cloud over Russia, investors are trading roughly half the volume that they did last quarter before the parliamentary elections,” he said. “This is going to be a major theme until at least the first week of March.”

The presidential election will be held on March 4.

‘Excluding Me’

The RTS index gained 1.7 percent to 1,522.57 yesterday, the highest since Dec. 5, and the 30-stock, ruble-denominated Micex index added 0.5 percent to 1,499.27.

Russia’s Central Elections Commission will conduct a second check on more than 2 million signatures collected by Yavlinsky after 23 percent were found to be invalid, an official from the commission’s press service, who declined to be identified, in line with policy, said by phone yesterday.

“They’re excluding me from the election because they don’t want there to be a choice,” Yavlinsky told reporters in Moscow. “They want to make sure there’s only one round.”

American depositary receipts of OAO Mechel, Russia’s largest coal producer for steelmakers, led gainers on the Bloomberg Russia-US 14 Index surging 5.5 percent to $10.99, and widening the premium to its Moscow-traded shares to 46 cents, the most since Oct. 24.

Mechel shares on the Micex rose 0.6 percent to 325 rubles yesterday, or the equivalent of $10.51. One Mechel ADR represents one ordinary share.

EU Embargo

Surgutneftegas gained 2.3 percent to $5.70, the highest price since May 10, after crude rose for the first time in four days as the European Union agreed to ban oil imports from Iran starting July 1. The oil producer’s shares in Moscow added 1.5 percent to 17.97 rubles, the equivalent of 58 cents. One ADR equals 10 ordinary shares.

Crude for February delivery rose 1.1 percent to settle at $99.58 a barrel on the New York Mercantile Exchange yesterday. Brent oil for March settlement increased 0.7 percent to $110.58 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, gained 0.8 percent to $109.42.

OAO Gazprom Neft, TNK-BP Holding and Bashneft are better buys than their larger Russian competitors because they provide higher dividends and have better production prospects, Troika Dialog analysts including Oleg Maximov and Alex Fak wrote in a report e-mailed yesterday.

Polyus Share Sale

OAO Gazprom Neft, the oil arm of Russia’s gas export monopoly OAO Gazprom, fell 1.3 percent to $24.13, after jumping 5.8 percent in New York last week. The Moscow-based company’s shares in Moscow slipped 0.4 percent to 150.05 rubles, or $4.86. One ADR equals five ordinary shares.

Polyus Gold International Ltd., Russia’s largest gold miner, was the biggest decliner on the Bloomberg Russia-US 14 index, losing 2.2 percent to $3.15, the lowest close since Jan. 11.

The miner -- owned by Mikhail Prokhorov, a billionaire political rival to Putin -- has picked Bank of America Corp., JPMorgan Chase & Co., VTB Capital and Renaissance Capital to arrange a $1 billion share sale as soon as the first half of this year, according to two people with knowledge of the plan who asked not to be identified as the information is private. The sale was postponed last year.

Yandex Search Share

CTC Media Inc. jumped 2.8 percent in New York to $9.97, extending its 2012 advance to 14 percent. The U.S.-listed Russian television network will reduce expenses this year by shifting to locally produced series that are as popular with viewers as the imported shows they replace, said Anna Lepetukhina, an analyst at Troika Dialog in Moscow, Russia’s oldest brokerage.

Yandex NV, operator of Russia’s most popular Internet search engine, slipped 1.6 percent to $18.44, the biggest decline in a week.

The Hague, the Netherlands-based company’s share of the Russian search market declined to 59.7 percent in the week through Jan. 22, from 59.9 percent the previous week, Liveintenet.ru, an Internet-service provider and researcher, reported yesterday.

Yandex’s market share “has been deteriorating since the beginning of December 2011,” David Ferguson and Anastasia Demidova, Moscow-based analysts at Renaissance, wrote in an e- mailed report yesterday.

--With assistance from Ilya Khrennikov and Yuliya Fedorinova in Moscow. Editors: Glenn Kalinoski, Emma O’Brien

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: Emma O’Brien at eobrien6@bloomberg.net


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