Bloomberg News

Futures Jump as Barclays Downplays Protests: Russia Overnight

February 07, 2012

Feb. 7 (Bloomberg) -- Russian equity futures climbed as Barclays Capital recommended investors buy the nation’s energy and commodities stocks, saying that the risk of the government being ousted has been “overestimated.”

Futures expiring in March on Moscow’s dollar-denominated RTS index gained 0.4 percent to 163,355 in U.S. trading yesterday after Brent oil, the benchmark for Russia’s Urals crude blend, hit a six-month high. CTC Media Inc., owner of Russia’s fourth-largest television channel, fell the most in three months after Morgan Stanley downgraded the stock.

Tens of thousands of people took to the streets of Moscow over the weekend in the latest protest since Prime Minister Vladimir Putin’s United Russia party won a reduced majority in parliament amid allegations of ballot-box fraud. Given the lack of large-scale unrest, the political risk being priced into Russian assets is excessive and may spur reforms that will benefit the economy, Barclays analysts led by Neil Wedlake wrote in a report e-mailed yesterday.

“The political risk for Russian stocks is overblown,” Ilya Kravets, a research analyst at ED Capital in New York, which manages almost $100 million in assets, said in an interview. “Six to 12 months from now, Putin will have consolidated power and these protests will have resulted in keeping the pressure on the political system and for economic reform, that will be good for Russian stocks.”

The Bloomberg Russia-US 14 Index of Russian companies traded in New York fell for the first time in five days, losing 0.3 percent to 107.77. After dropping 11 percent from Dec. 5, the first day of trading after the Duma elections, to the end of 2011, the index has rebounded 19 percent in 2012.

Gold Drops

CTC Media was the biggest decliner on the index, falling 6.7 percent to $10.36, the lowest price since Nov. 9.

Morgan Stanley downgraded the stock to “equal weight” from “overweight” on Feb. 3 and cut its price target to $14 from $16.

Polyus Gold International Ltd., the country’s biggest gold producer, declined as gold futures fell to a one-week low. Polyus dropped 2.6 percent to $3.40, paring this year’s 15 percent advance.

The Standard & Poor’s GSCI Spot Index of commodities rose 0.3 percent to 668.53 as nickel gained, boosting the American depositary receipts of OAO GMK Norilsk Nickel, the world’s largest producer of the metal, by 0.6 percent to $19.80. Norilsk shares added 0.2 percent on Russia’s ruble-denominated Micex Index to 5,867 rubles, or $195. One ADR represents one-tenth of an ordinary share.

Russia ETF Slides

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, retreated 0.6 percent to $31.67, its second daily drop in three days. The RTS Volatility Index, which measures expected swings in the index futures, dropped for the fourth time in five days, falling 1.4 percent to 32.84 points.

Russian equities have benefited in 2012 as investors “experienced a surge in risk appetite” bolstered by “increasing evidence of stabilization in global growth,” according to the Barclays report.

OAO Gazprom, the world’s biggest natural gas exporter, OAO Lukoil, Russia’s largest non-state oil producer, and OAO Sberbank, Russia’s chief lender, are among stocks Barclays lists as “ranking highly.”

Gazprom and oil producer OAO Rosneft will remain state-run for now, Putin said yesterday. The state will only consider relinquishing control of the two companies when the economic situation is right, he said.

Urals Crude

Gazprom fell 0.3 percent to $12.65 in New York as its shares in Moscow traded little changed at 189.73 rubles, or the equivalent of $6.31. One ADR represents two ordinary shares. Lukoil’s ADRs fell 0.5 percent to $59.90 after the company’s shares dropped 0.2 percent on the Micex to 1,809.70 rubles, or $60.13. One ADR represents one ordinary share.

Sberbank retreated 1.3 percent to $12.51 after the bank’s Micex shares dropped 0.7 percent to 93.87 rubles, or the equivalent of $3.12. One ADR represents four ordinary shares.

Brent crude for March settlement gained 1.2 percent to $115.93 a barrel on the London-based ICE Futures Europe exchange, the highest level since Aug. 2. Urals crude, Russia’s chief export blend, added 1.5 percent to $116.23, the highest since Sept. 19.

Yandex NV had its biggest one-day drop in a week after a report showed that the operator of Russia’s most popular Internet search engine’s market share dropped, while competitor Group’s increased. Yandex’s U.S.-traded shares fell 1.5 percent to $21.50 in New York, the largest decline since Jan. 30.

The RTS Index in Moscow was little changed yesterday at 1,626.46 and the 30-stock Micex was also little changed at 1,562.87, dropping for the first time in five days.

--Editors: Emma O’Brien, Marie-France Han

To contact the reporters on this story: Leon Lazaroff in New York at Halia Pavliva in New York at

To contact the editor responsible for this story: Emma O’Brien at

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