Bloomberg News

Russia Stocks Advance on Possible Khodorkovsky Parole, Germany

March 26, 2012

Russian stocks headed for their biggest gain in almost two weeks after Deutsche Bank AG said former Yukos Oil Co. billionaire Mikhail Khodorkovsky has a “50-50” chance of winning an early release and after a report showed German business confidence unexpectedly rose.

The Micex Index (INDEXCF) of 30 shares increased 0.8 percent at 3:55 p.m. in Moscow to 1,555.51, poised for its largest advance since March 14. OAO Magnitogorsk Iron & Steel jumped 1.7 percent, Moscow utility OAO Mosenergo climbed 1.5 percent and state- controlled lender VTB Group added 1.7 percent.

The odds of Khodorkovsky being freed are “significantly higher than anytime in the past,” Yaroslav Lissovolik, Deutsche Bank’s head of research and strategy for Russia, said in a note to clients distributed today. The Kremlin’s human rights council this month urged outgoing President Dmitry Medvedev to pardon Khodorkovsky before Putin’s inauguration, which is scheduled for May 7.

Releasing Khodorkovsky would boost Russian stocks 5 percent to 10 percent, Lissovolik said in the note. He declined to comment further when reached by phone today. The Russian gauge surged as much as 1.6 percent in August 2008 on a report, later retracted, Khodorkovsky had been given parole.

Khodorkovsky was arrested on the tarmac of a Siberian airport in 2003 and sentenced to 13 years in prison after two convictions for fraud, tax evasion and oil embezzlement. Khodorkovsky maintains his innocence, saying the cases against him were retribution for his opposition to Putin.

Review of Verdict

Medvedev ordered a review of guilty verdicts against Khodorkovsky and his business partner Platon Lebedev, giving Prosecutor General Yuri Chaika until April 1 to present his findings, the Kremlin said in a statement March 5.

“The initial knee-jerk would be positive but whether it held would have more to do with the price of oil and data indicators coming out of China,” said Chris Weafer, chief strategist at Troika Dialog, the investment bank owned by Russia’s largest lender OAO Sberbank. Weafer also believes Khodorkovsky has a “50-50” chance of an early release.

European stocks rallied after Germany’s Ifo institute reported its business climate index, based on a survey of 7,000 executives, rose to 109.8 from a revised 109.7 last month. Economists had forecast it to remain unchanged at the initial February reading of 109.6.

Magnit, Crude

OAO Magnit, Russia’s largest food retailer by market value, added 0.5 percent to 3,625 rubles. The company, based in Krasnodar, southern Russia, reported last week a 21 percent jump in its net income for 2011 to 12.3 billion rubles ($360 million).

OAO Sberbank (SBER), Russia’s biggest lender, surged 1.6 percent to 98.99 rubles, poised for the highest close in a week ahead of its fourth-quarter earnings release on Wednesday.

“In light of the ongoing rapid expansion in lending, the bank is set to deliver invariably strong core income,” said Leonid Slipchenko, senior analyst at UralSib Financial Corp., who predicts a 15 percent increase in the bank’s income from the prior year.

Oil for May delivery slid 9 cents to $106.78 a barrel on the New York Mercantile Exchange. Prices rose $1.52 to $106.87 on March 23, the highest close since March 21.

The dollar-measured RTS Index added 1.4 percent to 1,692.26. The ruble strengthened for a second day, appreciating 0.7 percent to 29.08 per dollar.

The Micex is the cheapest of the benchmark indexes for BRIC countries, trading at about 6 times earnings estimated by analysts. That compares with about 9.8 for the Shanghai Composite Index and 15.1 for the BSE India Sensitive Index.

To contact the reporter on this story: Brad Cook at bcook7@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net


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