Bloomberg News

Futures Rise as Putin Vows to Cut State Role: Russia Overnight

January 31, 2012

Jan. 31 (Bloomberg) -- Russian equity futures rose as Prime Minister Vladimir Putin pledged to reduce government involvement in the economy and stocks traded at the cheapest level among emerging markets for the first time in two months.

Futures expiring in March on Moscow’s dollar-denominated RTS index added 0.9 percent to 155,660 in U.S. trading yesterday and an index measuring volatility in futures trading slid to the lowest level since August. Polyus Gold International Ltd. slipped the most since Jan. 17 after reporting that 2011 earnings trailed analysts’ forecasts.

Putin, who is running for president in March, vowed to sell state assets and reduce the reliance of the world’s biggest energy exporting economy on commodity sales, according to an article he wrote in yesterday’s Vedomosti newspaper. Russia’s Micex Index slid 0.8 percent, leaving it to trade at 5.7 times analysts’ earnings estimates for member companies, the least of the 21 emerging markets tracked by Bloomberg and the cheapest compared to Egypt’s EGX30 Index since Nov. 24.

“The more Putin talks the reform case, the more investors will become interested,” Kingsmill Bond, chief strategist at Citigroup Inc. in Moscow, said by phone from Frankfurt yesterday. “Russian equities, like many risk assets, remain cheap but Europe is still the key factor in determining market levels, and that’s really outside of Russia’s control.”

The Bloomberg Russia-US 14 Index of Russian companies traded in New York fell 1.2 percent to 103.15 yesterday as concern that a second rescue package for Greece is yet to be finalized pushed crude for March delivery down 0.8 percent to settle at $98.78 a barrel on the New York Mercantile Exchange.

Falling Volatility

The RTS Volatility Index, which measures expected swings in the index futures, dropped for a second day, falling 1.5 percent to 32.03 points, the lowest level in almost six months. The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, declined for the first time in six trading sessions, dropping 1.5 percent to $30.09.

The European Commission, European Central Bank and International Monetary Fund tangled yesterday with Greek officials over the terms of a 130 billion euro package ($170.7 billion) pledged in October. Greek Prime Minister Lucas Papademos said after the summit that he’s “strongly committed” to reaching a debt-swap accord with bondholders. The ECB’s 489 billion euros of three-year loans made in December helped to stabilize sentiment among euro zone bondholders, warding off a funding squeeze.

‘Headline Risk’

“Even though the ECB has been active doesn’t change some of the underlying structural concerns about Europe’s debt situation,” Vlad Milev, a Los Angeles-based analyst at Metzler Payden, which manages $750 million, said in a phone interview. “A short term resolution to Europe’s concerns is going to lend support for Russian equities but heading into February and the March elections, there is still room for headline risk.”

United Co. Rusal, the world’s largest aluminum producer, dropped 1.9 percent to HK$5.85 in Hong Kong trading as of 11:22 a.m. local time. Aluminum futures in London lost as much as 0.5 percent in electronic trading.

Egypt’s EGX30, which trades at 6.5 times analysts’ earnings estimates for member companies, widened its premium over the Micex to the most since Nov. 24 yesterday, data compiled by Bloomberg showed.

Russian and Egyptian stocks have been the cheapest among developing countries for more than four months. Brazil’s Bovespa Index trades at 10 times estimated earnings, compared with 9.4 times for the Shanghai Composite Index and the BSE India Sensitive Index’s ratio of 14.8.

Missed Estimates

Brent oil for March settlement slipped 0.6 percent to $110.75 a barrel on the London-based ICE Futures Europe exchange while Urals crude, Russia’s chief export blend, fell 0.1 percent to $110.63.

Polyus Gold fell the most in two weeks in U.S. trading after earnings came in lower than analysts estimated as higher labor, electricity and currency costs eroded profit, even as gold prices rose 10 percent last year. Polyus’ ADRs retreated 3.6 percent to $3.19. One ADR equals one ordinary share.

Polyus’s earnings before interest, tax, depreciation and amortization rose to about $1.04 billion to $1.06 billion last year from $717 million in 2010, the company said yesterday in a statement. That missed the $1.15 billion average estimate of 13 analysts surveyed by Bloomberg.

Mobile-phone companies VimpelCom Ltd. and OAO Mobile TeleSystems rose in New York, following U.S. cell phone operators AT&T Inc. and Verizon Communications Inc. higher, according to Marco Casas, an analyst in New York at Otkritie Financial Corp. VimpelCom gained 1.6 percent to $10.52, and Mobile TeleSystems’ ADRs added 0.3 percent to $16.74.

Severstal Output

The RTS Index declined 1.2 percent, the most since Jan. 5, to 1,551.61, and the 30-stock Micex lost 0.8 percent to 1,496.30. The European Bank for Reconstruction and Development and the Russian Direct Investment Fund agreed to acquire 6.29 percent and 1.25 percent stakes in Russia’s MICEX-RTS stock exchange, they said in a statement yesterday.

OAO Severstal, the steelmaker controlled by billionaire Alexey Mordashov, is scheduled to publish production data for the fourth quarter today. Severstal also produces gold. Ros Agro Plc, the Russian grain and sugar producer, also known as Rusagro, reports production results for 2011.

--With assistance from Ilya Khrennikov in Moscow and Darren Boey in Hong Kong. Editors: Marie-France Han, 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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