Bloomberg News

Putin Drives Gazprom Gains on Tax Cut Outlook: Russia Overnight

December 20, 2012

OAO Gazprom led a rally in Russian stocks traded in the U.S., and RTS Index equity futures gained, after President Vladimir Putin pledged to cut taxes and lure investment back to the world’s biggest energy exporter.

American depositary receipts of Gazprom, Russia’s biggest company, climbed the most in three months in New York, driving a 0.9 percent advance in the Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. ADRs of OAO Lukoil rebounded from their cheapest level relative to emerging-market energy producers in a month. Futures expiring in March on the RTS added 0.5 percent to 153,670 during U.S. hours.

Putin, speaking at a more than four-hour press conference in Moscow yesterday, said the government will seek to lower Russia’s tax burden, better safeguard the interests of business owners and undertake measures to bring about the “de- offshorization” of the economy. Moscow’s benchmark Micex Index trades at an average multiple of 5.5 times estimated earnings, the lowest valuation among 21 emerging markets tracked by Bloomberg.

“Those were the right signals and the market takes it as a stimulus for growth,” Ivan Manaenko, the head of research at Veles Capital LLC in Moscow, said in a phone interview yesterday. “Lower taxes and higher investment, this is exactly what is needed. Those are the right words, the question is what kind of actions will follow.”

Capital Repatriation

Putin, who returned to the Kremlin in March after four years as prime minister, is driving a bid to repatriate $1 trillion of capital back to Russia. The Economy Ministry has estimated net capital outflow could total $75 billion in 2012, after doubling to $80.5 billion last year. Volumes on the Micex are about a third the level of Brazil’s Bovespa Index, which has a an average valuation of 17.9 times estimated earnings, data compiled by Bloomberg show.

The Bloomberg Russia-US Equity Index (RUS14BN) rose to 98.72 yesterday, the highest level since Oct. 22. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, added 1.2 percent to $29.97, the highest close since Sept. 18. The RTS Volatility Index, which measures expected swings in futures, fell 0.3 percent to 20.51.

Putin said Dec. 12 that the country should proceed with anti-corruption legislation that would put limits on bureaucrats and lawmakers, including the president and prime minister, owning foreign bank deposits and securities. Russia kept its ranking as the world’s most corrupt major economy this year, according to a Transparency International’s Corruption Perceptions Index. Russian capital outflow in 2012 is seen at between $65 billion and $67 billion, Central Bank Chairman Sergei Ignatiev told reporters in Moscow on Dec. 19.

Gazprom Gains

Gazprom advanced 3.7 percent to $9.35 in New York yesterday, rising to the highest level since Oct. 26. The ADRs settled at a 0.8 percent premium to the company’s Moscow-listed shares, the biggest gap since Sept. 27. The stock increased 1.6 percent in Moscow to 142.38 rubles, or the equivalent of $4.64.

Lukoil, Russia’s second-biggest producer after OAO Rosneft, rose 3.3 percent to $66.89 in New York yesterday, the highest level since Aug. 1. The stock recovered from the cheapest level versus peers on the MSCI Emerging Markets Energy Index since Nov. 14. The Moscow based company said billionaire owners Vagit Alekperov and Leonid Fedun bought about $260 million in stock. The stock gained 1.4 percent to 2,037.3 rubles, or the equivalent of $66.39, the highest level since April 2011.

Oil Advances

OAO Sberbank, Russia’s biggest lender, increased 0.3 percent to $12.29, with trading volumes almost three times the daily average over the past three months, data compiled by Bloomberg show. The lender said in a regulatory filing yesterday it expects net income will reach as much as 390 billion rubles ($12.7 billion) in 2013. The Moscow-based bank’s stock was little changed at 94.51 rubles, or $3.08.

Oil advanced for a fifth day in New York, the longest stretch of gains since September. Crude oil for February delivery rose 0.2 percent to $90.13 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 18. Brent oil for February settlement fell 0.1 percent to $110.20 a barrel on the London-based ICE Futures Europe exchange. Urals crude, the country’s main export blend, climbed 0.1 percent to $109.56 a barrel yesterday.

Futures expiring in March on the ruble showed the currency weakening 0.1 percent to 31.116 per dollar after climbing for a third day in Moscow yesterday, for a gain of 0.2 percent to 30.6625.

United Co. Rusal, the world’s largest aluminum producer, dropped 0.4 percent to HK$4.91 in Hong Kong trading as of 10:46 a.m. local time. The MSCI Asia Pacific Index fell 0.3 percent.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

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


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