Bloomberg News

Ruble Futures Rally on Crude to Revive: Russia Overnight

November 20, 2012

Ruble futures climbed to the strongest level in a month on speculation a revival in oil prices and relatively high interest rates will lure investors to Russian assets.

Futures on the Russian currency expiring in December added 0.1 percent to 31.473 per dollar during U.S. trading hours yesterday, the strongest level since Oct. 22. Contracts on the country’s RTS stock index were little changed at 140,010 as the Bloomberg Russia-US Index of the most traded Russian companies in the U.S. was also steady.

The ruble has gained 2.7 percent versus the dollar in 2012, beating a 1 percent advance in the Chinese yuan and a 10 percent tumble in the Brazilian real, data compiled by Bloomberg show. Russian oil blend Urals crude, while down 1.3 percent yesterday, has traded at an average $110.49 a barrel this year, up from $109.47 in 2011. Russia’s 8.25 percent refinancing rate compares with the euro area’s 0.75 percent benchmark, the U.K.’s 0.5 percent and 4.5 percent in Poland.

“I would still be a buyer of the ruble,” Rogerio Oliveira, a fixed-income strategist at Peridiem Global Investors LLC, said by phone from Los Angeles yesterday. “Higher tensions in the Middle East and relatively high interest versus other currencies, like the euro and the pound, make it very attractive.”

The ruble surged 0.6 percent to 31.3113 per dollar in Moscow yesterday, while the 30-stock Micex Index slid 0.2 percent 1,395.77. The Bloomberg Russia-US gauge gained 0.1 percent to 91.82 in New York, as declines in coal producer OAO Mechel (MTL:US) and phone operator OAO Mobile TeleSystems (MBT:US) offset Yandex NV (YNDX:US)’s advance.

Crude Slumps

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, dropped 0.2 percent to $27.34 yesterday, the first decline in four days. The RTS Volatility Index, which measures expected swings in futures, fell 0.7 percent to 24.72 points.

Crude oil, Russia’s biggest export earner, slumped 2.8 percent on the New York Mercantile Exchange yesterday to $86.75 a barrel. Brent oil for January settlement slipped $1.87, or 1.7 percent, to end the session at $109.83 a barrel on the London- based ICE Futures Europe exchange.

Prospects of a cease-fire between Israel and Hamas to end fighting in the Gaza Strip drove yesterday’s declines. A truce won’t be possible before today because Israel hasn’t responded to proposals, Hamas official Ezzat al-Rishq said yesterday, according to a Reuters report. The Israeli military said in Twitter posts that it hit more than 30 targets in Gaza after about 8 p.m. local time yesterday.

Ruble Strength

Even if the situation in Gaza is resolved, Israel’s tensions with Iran will probably buoy oil into 2013 and thereby bolster the ruble, according to Win Thin, global head of emerging-markets strategy at Brown Brothers Harriman & Co. in New York.

“No one really buys Russia for domestic fundamentals,” Thin said by e-mail yesterday. “I still see the ruble as an oil play.”

Crude oil futures for November 2013 delivery are trading at $90.22 a barrel on the Mercantile Exchange. There’s a 33 percent chance that Israel will wage an air strike against Iran by the end of next year, according to bets made on Intrade.com, compared with 36.2 percent a week ago.

The ruble will strengthen to 30.96 per dollar by the end of the first quarter, according to the median of 23 analysts’ forecasts compiled by Bloomberg.

Falling Yields

Yields on ruble-denominated Russian government debt due in August 2016 have fallen 28 basis points, or 0.28 percentage point, this quarter to 7.05 percent yesterday. The average sovereign yield has dropped 10 basis points to 3.42 percent in the same period, according to an index compiled by JPMorgan Chase & Co.

Yandex, owner of Russia’s biggest Internet search engine, was the biggest gainer on the Russia-US gauge yesterday, rising 1.6 percent to $22.54. The company isn’t traded in Russia.

American depositary receipts of Mechel (MTLR), the nation’s largest producer of steelmaking coal, dropped 2.1 percent to $5.96 in New York. The company’s shares slipped 1.8 percent in Moscow to 189.20 rubles, or $6.05, the lowest since Sept. 5. The ADRs traded at a 1.4 percent discount to the company’s Micex- listed shares.

Mobile TeleSystems

Mobile TeleSystems’ ADRs tumbled 2.4 percent in New York to $17.35 as shares in Moscow slid 0.9 percent to 233.61 rubles, or $7.46. Each ADR represents two common shares.

Sweden’s Tele2 AB may get control of a mobile venture under discussion with OAO Rostelecom, Vedomosti newspaper reported, citing an unidentified person close to a Rostelecom shareholder.

“This is important news with long-term implications on Megafon, Mobile TeleSystems and Vimpelcom,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said by e-mail yesterday. “The combination of the two and creation of a single number four player would allow to speed up mobile data network rollout and get closer to the Big-3.”

ADRs of VimpelCom Ltd. (VIP:US), the mobile carrier with operations in Russia, Italy, Africa and Asia, gained 0.7 percent in New York to $10.81, the second day of advances.

United Co. Rusal, the world’s largest aluminum producer, dropped 1.1 percent to HK$4.39 in Hong Kong trading as of 11:14 a.m. local time. The MSCI Asia Pacific Index gained 0.3 percent.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • MTL
    (Mechel)
    • $1.71 USD
    • -0.02
    • -1.17%
  • MBT
    (Mobile Telesystems OJSC)
    • $18.45 USD
    • -0.97
    • -5.26%
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