Bloomberg News

Micex Rises Second Day on U.S. Data; Rosneft Rallies on Sechin

May 22, 2012

Russian stocks climbed for a second day as U.S. data beat estimates and OAO Rosneft, the country’s biggest oil producer, rose after Prime Minister Dmitry Medvedev named Igor Sechin its chief.

The 30-stock Micex climbed 0.2 percent to 1,301.09 by the close in Moscow. Rosneft rose 1.7 percent, while OAO Mechel (MTLR), a Russian steel and coal producer, rallied 5.3 percent. Bank Vozrozhdenie advanced 3.3 percent after posting a jump in first- quarter profit. Federal Grid Co., Russia’s state-run high voltage power transmission company, sank 1.8 percent after it said the government will raise prices the state company charges less than forecast.

Rosneft rose the most in almost two weeks as Medvedev said he ordered the board to appoint Sechin chief executive officer after he helped build the state-run company into the nation’s biggest oil producer. The National Association of Realtors said sales of existing homes in the U.S. increased in April for the first time in three months.

“The market was oversold,” Dimitri Kryukov, a partner at Verno Capital in Moscow, which manages $200 million in Russian equities, said by phone. “Any positive data from the U.S. is market-moving, but the market remains at bear levels.”

The Micex (INDEXCF) entered a bear market last week after tumbling more than 20 percent from its March 14 high. Urals crude, Russia’s main export earner, lost 0.5 percent today to $107.80 a barrel after jumping 2 percent yesterday.

Russia, the world’s biggest energy exporter, received almost 50 percent of budget revenue from oil and gas sales last year, according to government estimates.

Counterweight

Putin appointed a number of former ministers as his aides today, creating a counterweight decision-making center to the cabinet headed by Medvedev a day after unveiling a new government that kept Anton Siluanov as finance minister.

Putin confirmed the new cabinet yesterday, keeping the finance, defense and foreign ministers as well as First Deputy Prime Minister Igor Shuvalov, his pointman for relations with foreign investors and the country’s richest businessmen. Putin replaced Sechin with Arkady Dvorkovich as a deputy prime minister in charge of energy.

“Classic cheap energy stocks, like Gazprom, Lukoil, may gain on the appointment of Dvorkovich instead of Sechin,” Kingsmill Bond, chief equities strategist at Citigroup Inc. in Moscow, said by phone. “We don’t know what the reforms will be but clearly, as a rule, cheaper stocks tend to benefit on reform agendas.”

First BRIC Bear

Lukoil, the country’s second-biggest oil producer, dropped 0.5 percent to 1,630.50 rubles while OAO Gazprom, the natural gas export monopoly, added 1 percent to 143.43 rubles.

The country was the first of the so-called BRIC countries to enter a bear market in 2012 last week after the dollar- denominated RTS Index fell more than 20 percent from a March 15 peak.

Redemptions at Russia-focused equity funds declined in the week through May 16 to $52 million compared with $188 million the week before, according to EPFR Global.

European Union leaders are preparing to gather in Brussels tomorrow to discuss how to revive growth and snap a political impasse in Greece, where voters rejected austerity measures in elections on May 6.

Citigroup cut its rating of emerging-markets stocks to neutral yesterday, citing the prospect of a “tough summer” with the escalating European crisis a potential catalyst for further declines.

Federal Grid slid to 22.55 kopeks. Russia’s Federal Tariff Service confirmed an 11 percent increase in the company’s power tariffs under the so-called regulatory asset base, or RAB, starting July 1, according to a statement. Rates will rise 9.4 percent in July 2013 and by the same amount the following year, the company said.

To contact the reporter on this story: 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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