Bloomberg News

Mechel Premium Swells as U.S. Jobs Buoy Metals: Russia Overnight

February 07, 2012

Feb. 6 (Bloomberg) -- OAO Mechel’s shares in New York traded at the highest premium over its Moscow stock since October and equity futures climbed as the improving outlook for U.S. employment bolstered commodities.

Mechel surged to the highest level in almost three months on Feb. 3, advancing for the sixth straight week. Russia’s largest coal producer for steelmakers led gains on the Bloomberg Russia-US 14 Index of Russian companies traded in New York, which added 3.5 percent last week to 108.11, a five-month high. Futures expiring in March on Moscow’s dollar-denominated RTS index rose 0.9 percent to 164,520 in U.S. trading on Feb. 3.

Crude, Russia’s biggest export earner, climbed and copper and nickel advanced on Feb. 3 after a report showed the U.S. unemployment rate fell to the lowest level last month since February 2009. The better-than-estimated data along with a Federal Reserve’s pledge to keep U.S. interest rates low boosts prospects for the world’s largest economy. Russia’s Micex Index is the cheapest among 21 emerging markets tracked by Bloomberg.

“The U.S. jobs number was very good, and coupled with decent growth prospects here and the promise of low rates for two years, you have a very good environment for emerging-market equities like Russia,” Arjun Jayaraman, who manages $400 million in emerging-market equities at Causeway Capital Management in Los Angeles, said in a phone interview. “It’s a double whammy for Russia as the market is still very cheap.”

The Micex trades at six times analysts’ earnings estimates for member companies and rose 3.8 percent last week, extending its gain this year to 12 percent.

Cheapest of BRICs

That compares with a 13 percent gain in 2012 for Brazil’s Bovespa index, which trades at 10 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 9.6 times estimated earnings, and the BSE India Sensitive Index has a ratio of 16.

United Co. Rusal, the world’s largest aluminum producer, gained 1.3 percent to HK$6.05 in Hong Kong trading as of 11:27 a.m. local time. The MSCI Asia Pacific Index increased 0.7 percent today.

Oil gained for the first time in six days on Feb. 3, paring a weekly loss, after the U.S. Labor Department report boosted the outlook for energy demand in the world’s largest oil consuming economy. Crude for March delivery added 1.5 percent to settle at $97.84 a barrel in New York on Feb. 3. Prices lost 0.6 percent in electronic trading today.

Brent oil for March settlement climbed 2.2 percent to $114.58 on the ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, gained 2 percent to $114.55, a three-month high.

Commodities Surge

Mechel’s American depositary receipts rose 11 percent to $12.37 in New York trading, boosting the premium over the company’s Micex-traded shares to 7.9 percent, or 91 U.S. cents. Mechel’s Moscow-traded shares rose 1.5 percent on Feb. 3 to 345.80 rubles, or the equivalent of $11.46. One Mechel ADR represents one ordinary share.

The Standard & Poor’s GSCI Spot Index of commodities advanced 1.3 percent to 666.43, the biggest one-day advance in a month.

ADRs of OAO Sberbank, Russia’s largest lender, rose 2.9 percent to $12.67, up 3.9 percent last week. Sberbank shares on the Micex gained 2 percent to 94.49 rubles, or the equivalent of $3.14. One ADR represents four ordinary shares.

Sberbank ADRs have climbed 27 percent this year, exceeding the 18 percent advance of the Bloomberg Europe Banks and Financial Services Index of 43 companies.

CTC Media Inc., owner of Russia’s fourth-largest television channel, climbed to a three-month high in New York on speculation advertising revenue will rise as the economy expands. The stock added 3.5 percent to $11.10, the highest close since Nov. 7, and jumped 5.5 percent in the week.

Indian Unit

The world’s largest energy exporting economy grew faster than economists predicted last year, expanding 4.3 percent, Russia’s Federal Statistics Service said on Jan. 31. Gross domestic product will rise 3.5 percent in 2012 and 3.7 percent in 2013, according to the median estimate of 17 economists in a Bloomberg survey.

OAO Mobile TeleSystems climbed after controlling shareholder AFK Sistema’s Indian mobile-phone business lost most of its licenses, reducing concern that MTS may be forced to buy the unit.

ADRs of MTS, Russia’s largest mobile-phone operator, rose 1.4 percent to $17.02 in New York, advancing 2 percent this week. MTS’s shares on the Micex increased 0.5 percent to 214.23 rubles, or $7.10. One ADR is equal to two ordinary shares.

Russia-dedicated funds received $237 million of new money inflows in the week ended Feb. 1, the largest influx since the week ended April 13, according to Cameron Brandt, director of research at data firm EPFR Global. The nine-month high in dedicated fund inflows followed four weeks during which new Russia investment totaled a net $3 million, Brandt said.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, advanced 4.4 percent last week to $31.88, bringing its 2012 gain to 20 percent. The RTS Volatility Index, which measures expected swings in the index futures, rose for the first time in four days, adding 4 percent to 30.02 points.

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

> SBER RU <Equity> SBRCY US <Equity> MTL US <Equity> MTLR RU <Equity> CTCM US <Equity> MBT US <Equity> ROSYY US <Equity> YNDX US <Equity>

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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