Bloomberg News

Russia Stocks Rise for Third Day as Urals Crude Near 1-Week High

March 27, 2012

Russian stocks advanced for a third day as Urals crude, the country’s main export, traded near a one-week high.

The 30-stock Micex (MICEX) index climbed 0.1 percent to 1,566.07 as of 11:57 a.m. in Moscow, after earlier rising as much as 0.6 percent and retreating 0.2 percent. Power distributor IDGC Holding rose to the highest price since March 20, while United Co. Rusal, the world’s biggest aluminum producer, dropped for a fourth day.

Russian stocks are set to extend their best start to a year since 2008 in the second quarter as tensions with Iran drive oil prices higher and Vladimir Putin accedes to the presidency, according to Societe Generale SA and Alfa Bank. Urals crude, the main Russian oil blend, climbed 0.4 percent to $122.36 per barrel yesterday, the highest price in a week, after Federal Reserve Chairman Ben S. Bernanke said continued monetary stimulus will be needed to bolster employment in the world’s largest economy.

“People look at Russia as an oil country, if everything is good with oil, the market will grow,” Natalia Orlova, the Moscow-based chief economist at Alfa Bank, Russia’s biggest private lender, said by phone. “Domestic reforms may add to that growth, but the main market growth will be determined by oil prices.”

Rosneft, Lukoil

OAO Rosneft (ROSN) and OAO Lukoil (LKOH), Russia’s two largest oil companies, gained 0.1 percent to 212.55 rubles and 0.1 percent to 1,850.40 rubles respectively. Smaller rival OAO Surgutneftegas jumped 0.6 percent to 31.18 rubles.

The dollar-denominated RTS index was little changed at 1,713.60. The gauge will reach 1,900 by the end of June, Alfa’s Orlova said. Brent crude, the oil type that underpins prices for Urals, will rise as much as 1.8 percent to $127.50 in the second quarter of 2012, according to Paris-based Societe Generale.

“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.

IDGC Holding rose 2 percent to 3.54 rubles. Rusal lost 0.5 percent to 216.60 rubles. OAO Sberbank, Russia’s largest lender, gained 0.4 percent to 100.42 rubles.

Third Term

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.

The Market Vectors Russia ETF, 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, which measures expected swings in the index futures, fell 0.7 percent to 31.61.

The Micex is the cheapest of the benchmark indexes for BRIC countries, trading at about 6.1 times earnings estimated by analysts. That compares with about 9.8 for the Shanghai Composite Index and 15.3 for the BSE India Sensitive Index.

To contact the reporters on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net; Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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