Polyus Gold International Ltd. (PLZLY:US) is trading more in line with the precious metal and less with Moscow’s benchmark stock index since Russia’s largest gold producer abandoned its home market in June 2012 for London.
The correlation for Polyus with the metal climbed to a record on Aug. 12 in New York, while that with the Micex index (INDEXCF) sank 35 percent over the past year, according to data compiled by Bloomberg. Since the company moved its primary listing to London to lure investment and boost valuations, its forward price-to-earnings ratio has climbed to about 19 from 10 at the beginning of the year, compared with 5.2 for the 50-stock Micex.
“By moving its listing to London, the company wanted to widen its investor base and distance itself from Russia-related risks,” Vladimir Sergievskiy, an analyst at Barclays Plc in London who rates the stock the equivalent of hold, said by phone Aug. 16. “The company’s revenue directly depends on the price of gold and it’s just natural when the stock’s correlation with the metal strengthens.”
Jersey-based Polyus gained 2.1 percent to 208 pence in London Aug. 16, advancing for a third week, while global depositary receipts climbed 2.2 percent to $3.20 in New York. The Bloomberg-Russia-US Equity Index (RTSI$) of most-traded Russian stocks rose for a second week and futures on the dollar-denominated RTS gauge expiring in September slipped 0.5 percent to 131,400 in U.S. hours Aug. 16.
Polyus, in which billionaire Suleiman Kerimov holds 40 percent, became the third Russian metals producer to move its primary listing to London last year after Polymetal International Plc, a silver and gold miner, and Evraz Plc (EVR), a steelmaker, moved their listings to London from Moscow in 2011. The 30-day average turnover for the 10 biggest Russian companies tracked by Bloomberg in London is about 54 percent greater than in Moscow.
The Micex gauge, the cheapest among 21 emerging markets tracked by Bloomberg, trades at 5.2 times estimated earnings, compared with ratios of 13 for India’s S&P BSE Sensex Index (SENSEX), 11.9 for Brazil’s Ibovespa (IBOV) and 8.3 for China’s Shanghai Composite Index (SHCOMP), according to data compiled by Bloomberg.
“Polyus’s main listing in London and the company now being under British jurisdiction protects it from Russian risks even as their production base remains in Russia,” Andrey Tretelnikov, an analyst at Rye, Man & Gor Securities, said by phone from Moscow Aug. 14. “It was strategically right decision. The market values Polyus higher than comparable Moscow-listed stocks.”
Gold traders are the most bullish in five months on signs that demand is picking up. Thirteen analysts surveyed by Bloomberg expect prices to rise this week, four were bearish and five neutral, the highest proportion of bulls since March 8. Consumer buying of the metal jumped 53 percent in the second quarter from a year earlier, almost making up for the record sales of exchange-traded products backed by bullion, World Gold Council data show.
Gold had the biggest weekly gain since July 12 as futures for December delivery rose 4.5 percent last week to $1,371 an ounce on the Comex in New York.
Polyus Gold’s 130-day correlation coefficient with the metal rose to a record-high 0.37 in New York Aug. 9, data compiled by Bloomberg show. The ADR’s coefficient with the nation’s Micex benchmark index decreased to 0.11 on Aug. 16, compared with 0.17 in May.
The Bloomberg Russia-US gauge slumped 0.3 percent to 91.26 Aug. 16, trimming its weekly gain to 0.4 percent. The Market Vectors Russia ETF (RSX:US), the largest exchange-traded fund dedicated to Russian equities, slipped 0.9 percent to $26.28 Aug. 16, paring its first weekly gain in four weeks to 0.5 percent. The RTS Volatility Index, which measures expected swings in the stock futures, decreased 2.1 percent to 22.25.
The Micex Index slipped 0.2 percent last week to 1,380.31. The dollar-denominated RTS Index also fell 0.2 percent last week to 1,323.42 in Moscow.
OAO Gazprom Neft (GZPFY:US), the country’s fourth-largest oil producer, rose 3.2 percent last week to $18.96, advancing for a third consecutive week, the longest stretch of weekly gains since February.
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