Bloomberg News

Gazprom Leads Eighth Weekly Drop as Oil Slumps: Russia Overnight

December 15, 2013

Russian stocks traded in New York are posting the longest stretch of weekly declines since June 2012 as OAO Gazprom (OGZPY:US) follows oil lower amid concern the Federal Reserve will cut U.S. monetary stimulus.

The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. fell 0.4 percent to 96.45 last week. American depositary receipts of Gazprom, Russia’s biggest company, sank 2.5 percent to a three-month low. Yandex NV (YNDX:US), the nation’s biggest Internet company, tumbled 4.3 percent after selling dollar bonds. OAO Rostelecom (ROSYY:US) posted the best week since Oct. 25 after the government approved the merger of its mobile assets into a joint venture with Tele2 Russia.

Russian stocks slumped in line with global equities as signs of improvement in the U.S. economy spurred speculation the Fed will rein in stimulus at this week’s policy meeting. Oil, Russia’s chief export earner, slid as falling demand boosted fuel inventories. Oil and natural gas account for about 50 percent of budget revenue in Russia.

“The lack of clarity on Fed tapering is weighing on global equity markets, including Russia,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solaris Group LLC, said by phone from Bedford Hills, New York Dec. 13. “We’ve seen weakness in the energy commodities and that hurt Russian equities over the past week.”

The Fed may begin reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll. Policy makers have said they may taper “in coming months” if the economy improves as expected.

Weaker Demand

The S&P GSCI Index of 24 commodities posted the biggest weekly decline since Nov. 1 as West Texas Intermediate crude dropped to the lowest level in 10 days. WTI will decrease through Dec. 20 on weaker fuel demand, 16 of 31 analysts and traders surveyed by Bloomberg said.

Russia’s central bank left its main lending rate unchanged for a 15th month last week after inflation accelerated more than forecast by economists in November. The economy of the world’s biggest energy exporter will probably grow 1.4 percent this year, less than half the 3.6 percent pace the government forecast in December 2012, according to Deputy Economy Minister Andrey Klepach.

Gazprom dropped to $8.12 in New York, extending this year’s slump to 17 percent. The shares are poised for the biggest annual decline since 2008.

Yandex, Rostelecom

Yandex capped the worst week in a month, dropping to $38.21. The company priced $600 million of five-year bonds at 1.125 percent, it said in a statement dated Dec. 11. The notes will be convertible into cash or Yandex shares (YNDX:US) based on a price of $51.45, which was 37 percent above the company’s closing price in New York that day.

Rostelecom rallied 4.2 percent to $19.97 last week, trading at a 1.9 percent discount to its Moscow shares. Rostelecom will hold 45 percent of the combined entity, Rostelecom said in a statement last week. The company will cut its debt by 16 percent when transferring mobile assets to the joint venture.

The Market Vectors Russia ETF (RSX:US), the biggest U.S.-traded exchange-traded fund that holds Russian shares, fell 0.4 percent to $27.91 last week. The RTS Volatility Index, which measures expected swings in stock futures, increased 0.5 percent to 22.13 in U.S. hours Dec. 13.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • OGZPY
    (Gazprom OAO)
    • $7.62 USD
    • -0.13
    • -1.71%
  • YNDX
    (Yandex NV)
    • $30.53 USD
    • -0.66
    • -2.16%
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