Bloomberg News

Oil Jump Buoys Fund Flows as N.Y. Stocks Climb: Russia Overnight

February 20, 2012

Feb. 20 (Bloomberg) -- Russian equities in New York posted the sixth advance in seven weeks, led by VimpelCom Ltd. and OAO RusHydro, as the best gain for oil this year bolstered flows into stock funds focused on the world’s largest energy exporter.

The Bloomberg Russia-US 14 Index of Russian companies traded in New York rose 2.6 percent last week to 109.14. Equity funds dedicated to Russia took in $109 million in the week ended Feb. 15, the third consecutive week of net inflows and the longest rising streak since November, according to EPFR Global. Futures expiring in March on Moscow’s RTS index rose 0.1 percent to 165,355 in U.S. trading on Feb. 17.

The 4.5 percent gain this year in oil, Russia’s biggest export earner, has boosted the allure of the nation’s stocks, the cheapest among 21 emerging markets tracked by Bloomberg. Crude traded in New York rose to a nine-month high, adding 4.6 percent last week, as an index of leading U.S. indicators rose in January and jobless claims slid to a four-year low. Prospects Greece will get its second bailout also supported energy prices.

“Russia has rallied strong from the December lows as the European situation has gotten better and oil has also stayed strong because of problems in the Middle East,” Nelson Saiers, who oversees $639 million at Alphabet Management LLC in New York, including Russian stocks, said on Feb. 17. “Russia is cheap from a valuation standpoint, and that continues to attract investors.”

VimpelCom’s Record Week

United Co. Rusal, the world’s largest aluminum producer, rose 1.7 percent to HK$6.78 in Hong Kong trading as of 10:08 a.m. local time. The MSCI Asia Pacific Index gained 1.1 percent today after China cut reserve requirements for banks to fuel lending and buoy economic growth.

VimpelCom, the world’s sixth-largest mobile-phone company with 200 million subscribers, added 3.6 percent to $12.21 in New York on Feb. 17, bringing its advance in the week to a record 9.4 percent. VimpelCom was the biggest gainer on the Bloomberg Russia-U.S. 14 gauge as largest shareholder, Telenor ASA, boosted its stake in the company and dropped claims against other investors, including second-largest stakeholder, Altimo, a unit of Russia’s Alfa Group.

The two investors may seek to form a new board.

Russian equity funds have attracted $457 million in 2012, trailing China funds that received a net inflow of $1.8 billion this year, said Cambridge, Massachusetts-based EPFR, a data research company.

RusHydro, Russia’s largest renewable energy producer, gained 6.6 percent last week in New York to $3.86 after shares in Moscow advanced 4.8 percent.

Government Revenue

Crude for March delivery jumped 1.7 percent in electronic trading on the New York Mercantile Exchange today. Futures rose 0.9 percent to $103.24 a barrel on Feb. 17, the highest settlement price since May 10. Brent crude for April settlement slipped 0.4 percent to $119.58 on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, gained 0.3 percent to $119.79.

Oil and natural gas constituted almost 50 percent of Russian government revenue last year.

OAO Mobile TeleSystems, Russia’s largest cell-phone operator and VimpelCom’s competitor in Russia and Ukraine, rose to the highest level in six months on Feb. 17 in New York as the largest U.S. largest mobile-phone companies, including AT&T, Verizon Communications Inc. and Sprint Nextel also gained.

Mobile TeleSystems -- or MTS, as the company is also known -- advanced 2.5 percent to 17.74 in New York on Feb. 17. The stock, up 21 percent this year, gained 4.9 percent last week, the most since the week ended Jan. 6. Shares fell 30 percent in 2011.

$1 Billion

Belarus’ government extended an offer last week to sell a 51 percent stake in their joint venture in the nation with MTS, after two failed auctions last year. The asking price is unchanged at $1 billion.

“I don’t think anyone would buy this for the ticket price of $1 billion,” Luis Saenz, chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie Financial Corp, said by e-mail on Feb. 17.

OAO Mechel, Russia’s largest producer of coal for steelmaking, fell 1.2 percent to $10.66 on Feb. 17, little changed from the previous week. The stock, which lost 71 percent last year, has gained 26 percent in 2012.

Moscow-based Mechel fell after saying during U.S. trading on Feb. 17 that it will halt production temporarily at two plants in Romania as cold weather in Europe disrupts scrap supplies. The stock gained on Moscow’s Micex Index before the announcement, rising 1.3 percent to 322.20 rubles, or $10.76.

Commodities Gain

The RTS Index in Moscow rose 0.9 percent on Feb. 17 to extend its advance for the week to 3.3 percent, while the 30- stock Micex gained 2.8 percent last week.

The Standard & Poor’s GSCI index of 24 raw materials rose 0.3 percent to 688.44 on Feb. 17 to extend its weekly gain to 2.2 percent. The surge in oil last week was partly offset by a decline in copper due to signs of slowing growth in China. Copper futures for May delivery fell 2.2 percent on Feb. 17 to settle at $3.716 a pound on the Comex in New York.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, gained 3.8 percent last week to $31.87, its sixth advance in the first seven weeks of 2012. The RTS Volatility Index, which measures expected swings in the index futures, fell for the third day in five on Feb. 17, losing 3.6 percent to 30.89 points.

The Micex has gained 12 percent in 2011 and trades at 6.1 times analysts’ earnings estimates for member companies. That compares with a 17 percent advance for Brazil’s Bovespa Index, which trades at 10.7 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 9.8 times estimated earnings, and the BSE India Sensitive Index has a ratio of 16.1.

--With assistance from 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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