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Market Vectors Russia ETF
Russian stocks will extend their best start to a year since 2008 in the second quarter as tensions with Iran drive oil higher and Vladimir Putin accedes to the presidency, Societe Generale SA and Alfa Bank said.
Moscow’s RTS Index (RTSI$) has climbed 24 percent in 2012 as Urals crude, Russia’s biggest export earner, rallied 16 percent and Putin won an election that will return him to the presidency for a third term. RTS futures expiring in June jumped 0.2 percent to 167,045 in U.S. trading yesterday, as the Bloomberg Russia-US Equity Index (RUS14BN) of Russian companies listed in New York rose 1.2 percent to 109.46, led by OAO Rostelecom. (ROSYY)
“People look at Russia as an oil country, if everything is good with oil, the market will grow,” Natalia Orlova, chief economist at Alfa Bank, Russia’s biggest private lender, said by phone from Moscow. “Domestic reforms may add to that growth but the main market growth will be determined by oil prices.”
Sales of oil and gas provided almost 50 percent of the Russian government’s revenue last year and make up 17 percent of gross domestic product. The RTS reached a record 2,498.10 in May 2008, the same year that Urals crude touched an all-time high of $142.94 a barrel in July. Putin, who became prime minister in 2008 after eight years as president because of term limit rules, led Russia as it emerged from its 1998 debt default and recorded economic growth of as much as 10 percent.
The RTS gained 2.7 percent to 1,712.85 in Moscow yesterday, its biggest advance since Feb. 24. The gauge will reach 1,900 by the end of June, Alfa’s Orlova said.
Brent oil for May settlement climbed 0.4 percent to $125.65 a barrel on the London-based ICE Futures Europe exchange yesterday, extending its advance to 17 percent this year. Brent, the oil type that underpins prices for Urals crude, will rise to $127.50 in the second quarter of 2012, according to Paris-based Societe Generale.
Urals crude, Russia’s chief export blend, added 0.4 percent to $122.36 yesterday. Brent will fall to $111 a barrel by the end of the second quarter, according to the median of 36 analysts’ estimates compiled by Bloomberg.
“We still expect oil to have an upside at this point, and that could really keep driving the Russian market up,” said Rebecca Cheong, a New York-based equity derivatives strategist at Societe Generale. “In the short term, oil will have more to do with keeping the market up than Putin’s reforms. Iranian production and exports are expected to fall on European and U.S. sanctions that should go into effect by July 1.”
Iran, the second-biggest oil producer in the Organization of Petroleum Exporting Countries, pumped 3.45 million barrels a day last month, the lowest level since September 2002, according to data compiled by Bloomberg. U.S. and European sanctions aimed at forcing Iran to halt its nuclear program have spurred threats from the Persian Gulf nation to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil.
OAO Lukoil (LUKOY), Russia’s biggest non-state oil producer, gained 1.5 percent to $63.80 in New York yesterday, after rising 0.8 percent to 1,848 rubles, or $63.83, on Moscow’s Micex Index. One depositary receipt is equal to one ordinary share.
OAO Gazprom Neft (GZPFY), the oil arm of Russia’s natural gas export monopoly, advanced 2.7 percent to $26.85 in U.S. trading, while the Moscow-based company’s Micex stock added 1.9 percent to 154.37 rubles, or $5.33.
Putin will start his third term as president on May 7 following a campaign in which he pledged to boost pensions and support for small business as well as reverse “repressive” state policies. The former KGB officer also said he’d continue with plans to reduce government stakes in state-run companies and tackle corruption.
“In the second quarter we’re going to get a lot more of the very positive domestic momentum, new agenda, new promises, some delivery of political reforms, measures against corruption, these are all taken positively by investors,” Chris Weafer, chief strategist at Troika Dialog, the investment banking unit of state-run lender OAO Sberbank, said in an interview at Bloomberg’s New York headquarters yesterday.
Russia, the world’s largest energy exporter, is viewed as the world’s most corrupt major economy, according to Transparency International’s 2011 Corruption Perceptions Index.
The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, climbed 2.4 percent to $32.09 yesterday, the biggest one-day advance since March 8. The RTS Volatility Index (RTSVX), which measures expected swings in the index futures, fell 0.7 percent to 31.61.
OAO Rostelecom, Russia’s biggest fixed-line phone provider, was the best performer on the Bloomberg Russia-US Equity measure yesterday, adding 3.2 percent to $30.91 in New York, the biggest one-day jump since Dec. 22.
Outgoing President Dmitry Medvedev set a 12-month deadline to merge Rostelecom and its largest shareholder, state- controlled OAO Svyazinvest, the Interfax newswire reported, citing a presidential decree signed yesterday.
Together with Vnesheconombank, Russia’s state-run development lender, the government will control more than 50 percent of the united company, Interfax reported.
Rostelecom (RTKM) fell 0.2 percent to 148 rubles, or $5.11, in Moscow yesterday. One depositary receipt is equal to six ordinary shares.
Crude and metals gained after Federal Reserve Chairman Ben S. Bernanke said accommodative monetary policy is needed to lower unemployment in the world’s biggest economy, making commodities a more attractive investment on bets global demand will recover. Oil futures added 0.1 percent to $107.03 a barrel on the New York Mercantile Exchange. The contracts lost 0.1 percent in electronic trading.
United Co. Rusal (486), the world’s largest aluminum producer, rose 0.2 percent to HK$5.72 in Hong Kong trading as of 11:19 a.m. local time, while the MSCI Asia Pacific Index gained 1.3 percent after Bernanke’s comments.
OAO GMK Norilsk Nickel, Russia’s biggest mining company, added 0.8 percent to $18.55 in New York.
Russian billionaire Oleg Deripaska’s En+ Group, which owns 47 percent of United Co. Rusal, the world’s biggest aluminum producer, held talks about buying Rusal’s stake in Moscow-based Norilsk, two people with knowledge of the discussions said yesterday, declining to be identified as the discussions are private.
En+ was prepared to offer as much as $9 billion for the 25 percent Norilsk stake, one of the people said. Rusal’s share is valued at around $8.8 billion, based on current share prices.
“For Norilsk, the switch of Rusal for Deripaska as an owner wouldn’t make a difference,” Valentina Bogomolova, an analyst at UralSib Financial Corp. in Moscow, said by phone yesterday. “This offer is undervalued. Norilsk may make a counter-offer and buy out their stake.”
The Standard & Poor’s GSCI index of 24 raw materials rose 0.3 percent to 705.29 yesterday. Copper, aluminum and tin rose in London.
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