OAO Rostelecom (ROSYY:US) surged the most in six weeks in New York on speculation President Vladimir Putin is moving toward reducing the government’s stake in the nation’s dominant fixed-line phone operator.
American depositary receipts of Rostelecom climbed 3.1 percent to $25.89 in the U.S., the biggest jump since March 26. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. gained for the first time in seven days, halting the longest run of daily declines in seven months. Futures expiring in June on Moscow’s dollar-denominated RTS Index dropped 0.9 percent to 143,625 in U.S. trading.
Putin, who returned to the Kremlin this week after four years as prime minister, ordered on May 2 for state-run companies Rostelecom and OAO Svyazinvest to merge by April 2013, according to a decree on the government’s website. The move signals the government will scale back its stakes in the companies as part of its privatization drive, according to Otkritie Financial Corp.
“The dialogue between President Putin’s pro-reform actions and positive market reaction continues,” Marco Casas, vice president of equity sales at Otkritie Inc. in New York, the U.S. arm of the Moscow brokerage, said by e-mail yesterday. The order to complete the merger “sends a strong signal that Putin is serious about the privatization of federal assets.”
The Market Vectors Russia ETF (RSX:US), a U.S.-traded fund that holds Russian shares, rose 1.7 percent, the most since April 12, to $27.17 in the U.S. yesterday. The RTS Volatility Index, which measures expected swings in the index futures, were little changed at 32.51 points in New York.
Boost ‘Market Value’
Putin signed at least a dozen decrees after being sworn in as president on May 7 and ordered the government to formulate plans this year for state companies to divest “non-core assets” and for government stakes in non-commodity producers to be reduced, according to a Kremlin statement.
“The merger should lead to an increase in Rostelecom’s market value because it ends cross-shareholding with Svyazinvest and transfers Svyazinvest’s assets to Rostelecom,” said Konstantin Chernyshev, head of research at UralSib Financial Corp in Moscow. Rostelecom also benefits from getting Svyazinvest’s mobile phone unit, he said.
Svyazinvest owns 43 percent of Rostelecom, according to its website, while Rostelecom owns 25 percent plus one share in Svyazinvest, according to Rostelecom’s site.
The government, including through its stake in state development bank VEB, will hold more than 50 percent of the new company, Rostelecom said in an April 2 statement.
The Bloomberg Russia-US Equity Index (RUS14BN) lost 1.2 percent to 94.41, rebounding from the longest losing streak since six declining sessions through August 8, 2011.
ADRs of OAO RusHydro (RSHYY:US), Russia’s largest hydropower producer and the biggest gainer on the gauge yesterday, rose 3.3 percent to $3.10 in New York, after gaining 1.1 percent to 95.29 kopeks in Moscow, or 3.16 U.S. cents, in Moscow. One ADR is equal to 100 ordinary shares.
OAO Mechel (MTL:US), Russia’s largest producer of coal for steelmakers, rose 1.7 percent to $7.26 in New York yesterday, rising from a three-year low reached on May 9. The company’s Russian stock added 5.4 percent in Moscow yesterday to 229.20 rubles, or the equivalent of $7.60. One ADR is equal to one ordinary share.
Mechel (MTLR)’s net income in the fourth quarter increased to $201.15 million from $25.7 million in the third, while revenue for the period declined 8.8 percent to $2.9 billion, according to the company’s statement yesterday.
“The recent worldwide slowdown has had, and the European sovereign debt crisis and the continuing uncertainty as to economic recovery may have, adverse consequences for our customers and our business,” the company said in a filing with U.S. Securities and Exchange Commission yesterday.
Mechel is delaying “for a long time” a potential share sale by its mining unit amid “weak financial markets,” Chief Financial Officer Stanislav Ploschenko said on a conference call.
The company will take a “few months” to review its assets and sell those which generate losses or thin margins to help cut $9.3 billion net debt, Ploschenko said.
OAO Surgutneftegas (SGTPY:US), Russia’s fourth-largest oil producer, fell the most in six months in U.S. trading yesterday. The stock dropped 5.9 percent to $5.40 in New York. The company’s preferred shares on Russia’s Micex Index rose 0.4 percent to 18.03 rubles or 60 U.S. cents yesterday. Ten preferred shares equal one ADR.
Surgutneftegas ADRs traded at a 9.7 percent discount to the company’s Moscow-listed shares, the biggest gap since June 2009.
Crude for June delivery rose 0.3 percent to $97.08 a barrel on the New York Mercantile Exchange yesterday, rising for the first time in seven days.
Brent oil for June settlement dropped 0.4 percent to $112.73 on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, declined 0.3 percent to $110.20.
The Organization of Petroleum Exporting Countries, responsible for 40 percent of global oil supplies, said that global oil stocks are outpacing demand levels, keeping its forecast for world consumption this year unchanged.
OPEC, scheduled to meet next month, is producing 8.3 percent more crude than it considers necessary this quarter, data released today by the Vienna-based group show. Russia is not an OPEC member and has no plans to join the organization, the country’s officials, including President Putin, have said.
United Co. Rusal, the world’s largest aluminum producer, fell 0.4 percent to HK$4.98 in Hong Kong trading as of 11:36 a.m. local time. The MSCI Asia Pacific Index slid 0.7 percent.
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