Bloomberg News

Micex Extending Gains to Aberdeen on Consumers: Russia Overnight

February 01, 2012

Feb. 1 (Bloomberg) -- Russian stocks may extend their best start to a year since 2006 as steady oil prices buoy domestic consumption and growth exceeds that in the global economy, according to Aberdeen Asset Management Plc.

Moscow’s benchmark Micex Index gained 8 percent last month, the biggest January advance since it surged 16 percent six years ago, and was up 1.2 percent to 1,514.03 yesterday. The Bloomberg Russia-US 14 Index of Russian companies traded in New York rose 0.3 percent to bring its jump last month to 14 percent, while futures expiring in March on the nation’s RTS index slipped 0.9 percent to 156,250 in U.S. trading yesterday.

“There’s a very compelling growth and consumption story in Russia which is due to the country’s relatively positive economic situation,” Osamu Yamagata, who helps manage $45 billion in emerging-market equities at Aberdeen in London, said by phone yesterday. “Assuming the price of oil is stable in 2012, we expect Russia to grow faster than the global economy benefiting companies focused on the domestic consumer.”

Urals crude, Russia’s biggest export earner and one of the biggest sources of government revenue along with natural gas sales, jumped 15 percent last year, helping stoke growth in retail sales to the most since 2008. Russia grew 4.2 percent last year, according to Prime Minister Vladimir Putin, more than the International Monetary Fund’s 3.3 percent estimate for the world economy in 2011.

OAO Mechel, Russia’s largest coal producer for steelmakers, surged 30 percent last month to become best performer on the Bloomberg Russia-U.S. 14 index, as the company reported a rise in coking-coal sales and investors sought out stock that lost 71 percent in 2011, the biggest decliner on the New York index.

Russia ETF Climbs

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, advanced for the sixth time in seven days yesterday, adding 0.6 percent to $30.26 to extend its gain for January to 14 percent, the most since October. The RTS Volatility Index, which measures expected swings in the index futures, rose for a second day, gaining 2.1 percent to 33.37 points.

Russian companies that can capitalize on the country’s expanding middle class will benefit in 2012 as consumption increasingly comprises a larger portion of the economy, according to Yamagata. Aberdeen owns shares in OAO Magnit, Russia’s biggest retailer by number of stores, O’Key Group SA and X5 Retail Group NV, Russia’s biggest food retailer by revenue, he said.

Russian ‘Laggard’

The dollar-denominated RTS Index in Moscow advanced 2 percent to 1,577.29 yesterday, adding 14 percent in January. The 30-stock, ruble-denominated Micex Index is the ninth best performer among emerging markets this year, lagging behind the 12 percent jump in Turkey’s ISE National 100 Index and 11 percent advances for India’s BSE Sensitive Index and Brazil’s Bovespa Index.

United Co. Rusal, the world’s largest aluminum producer, rose 0.7 percent to HK$5.94 in Hong Kong as of 11:06 a.m. local time. The MSCI Asia Pacific Index gained 0.1 percent today.

“Investors don’t yet have great conviction about Russian equities either way,” Tom Furda, director of Russian equity sales at Auerbach Grayson & Co.’s Moscow-based brokerage partner UralSib Financial Corp., said by phone in New York yesterday. “Russia has been a laggard compared to India and Brazil because oil has been sluggish compared to other commodities this month, and people were turned off by the parliamentary election shenanigans.”

Putin is running for a third term as Russia’s president in elections scheduled for March 4 after having to step down from the post in 2008 because of term limits. Protesters have taken to the streets of Russian cities since the Dec. 4 parliamentary poll, where Putin’s United Russia party won a reduced majority amid allegations of vote rigging.

Underperforming Petrobras

American depositary receipts of OAO Lukoil, Russia’s largest non-state oil producer, gained 0.3 percent yesterday to $58.34, advancing 9.7 percent in January. New York-traded shares of Petroleo Brasileiro SA, Brazil’s state-controlled oil company, rose 23 percent in January.

Crude for March delivery on the New York Mercantile Exchange added 0.2 percent to $98.63 a barrel in electronic trading. The contracts slipped 0.3 percent to settle at $98.48 a barrel yesterday, down 0.4 percent last month. Copper jumped 10 percent, the biggest January advance since 2003.

OAO RusHydro, the country’s largest hydro-power producer, was the best performing U.S.-traded Russian stock yesterday, after VEB, the state development bank, said it may acquire 10 percent of the company. VEB may spend 64 billion rubles ($2.1 billion) to buy treasury shares in RusHydro to help fund capital spending at the power utility, Chief Executive Officer Vladimir Dmitriev said in an interview in Davos, Switzerland.

CTC Slumps

The company’s ADRs rose 3.5 percent to $3.82 in New York, and added 26 percent in January. UBS AG reiterated its “buy” rating for RusHydro yesterday after the company reported that net income for the first nine months of 2011 climbed to 30.6 billion rubles ($1 billion) from 25.6 billion rubles a year earlier.

CTC Media Inc., the U.S.-traded owner of Russia’s fourth- largest television channel, fell in U.S. trading as its audience share declined from a year ago in the past four weeks, according to Moscow brokerage Renaissance Capital. The stock retreated 0.5 percent to $10.02, paring its 14 percent advance in January.

OAO Gazprom, the world’s biggest natural gas exporter and Russia’s largest company by market value, reports third-quarter earnings in Moscow today. State-run OAO Rosneft, the country’s biggest oil producer, is scheduled to publish earnings for the fourth quarter.

--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: Emma O’Brien at Eobrien6@bloomberg.net


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