10 June 2009 | Russia Economic Scan

10-June-2009

Russia Economic Scan

In this edition: Russian recession raises hope for reform, Medvedev tells executives Russia will rebound quickly, BRIC countries gain clout and prominence, Russia's Lukoil sells 5 bln ruble bond, Russian stocks gain investors' favour following spectacular rally.

Top headlines

CRISIS IMPACT: Russian recession raises hope for reform

• Russia's economy is mired in a deep recession, unemployment is soaring and industrial production is collapsing -- but some policymakers and economists fret that the Eurasian giant may recover too quickly. They fear long-delayed reforms to make business more competitive and the state more efficient will not happen if Russia bounces back rapidly, burying its problems once again under a gusher of oil money.
• The global financial crisis hit Russia with unexpected ferocity last year, knocking it from growth of 7 or 8% a year into a contraction of 9.5% in the first quarter of 2009 -- a bigger shock than in any other major world economy. (Guardian)

Medvedev Tells Executives Russia to Rebound Fast

• President Dmitry Medvedev says the Russian economy will rebound faster than expected. An audience of government officials and executives meeting at the weekend mainly agreed, while demurring on the shape of the recovery.
• “I expect the Russian economy, as one of these rapidly developing markets, to overcome its problems more quickly than had perhaps been expected,” Medvedev said at the St. Petersburg Economic Forum, an annual gathering in Russia’s former imperial capital that closed on June 6. (Bloomberg)

Emerging BRIC powers and the new world order

• Brazil, Russia, India and China -- the so-called BRIC group of emerging powers -- have gained clout over the past decade as their economies grew faster than those of developed countries.
• Russia is the world's second-largest oil exporter but the global financial crisis and a fall in oil prices last year triggered its worst recession in at least a decade. The economy is expected to contract by 6% in 2009 and President Dmitry Medvedev faces soaring unemployment and wage cuts that could undermine political stability, although the recent recovery in oil prices has helped. (Reuters)

Russia's LUKOIL sells 5 bln rouble bond--bookrunner

• Russian oil major LUKOIL started the placement of a 5 billion rouble ($159.9 million) bond, a spokesman for Troika Dialog, the mandated bookrunner for the deal, told Reuters on Wednesday.
• LUKOIL sees the coupon range for its first rouble-denominated bond issue since the credit crisis effectively froze the local bond market in the second half of last year, at 13.75-14.75%. The company plans to close the book June 19. (Reuters)

Investors' View of Russia Is Finally Brightening

• A recent survey of 30 European institutional investors by RBS showed that 57% expect the Russian market to outperform global markets over the next 12 months. However, only 39% said that Russian stocks are undervalued. This compares with 84% who thought this was the case in a similar RBS survey last September.
• The survey follows a spectacular rally in Russian stocks this year, which led the dollar-denominated Russian Trading System index to recover by more than 120% from its low of 498 on Jan. 23. It closed at 1105.3 on Tuesday. The ruble-denominated Micex index has gained 117% from a low of 513 on Oct. 27 and closed at 1113.83 on Tuesday. (Wall Street Journal)

Source: Russia Economic Scan

7 June 2009 | Russia Economic Scan

7-June-2009

Russia Economic Scan

In this edition: Russia sees economic rebound and more interest rate cuts, Russian economy forecast to contract up to 8%, World Bank says Russian stock rally points to economic recovery, Russia's VEB plans to buy Rostelecom shares, RusHydro shares to trade in London from July - Asia may follow.

Top headlines

Russia sees some economic rebound, more rate cuts

• Russia's economy will contract by less than the 6.5% forecast by the International Monetary Fund as some sectors start to recover and capital outflows slow to around zero, officials said on Friday.
• "We already have some signs of improvement but not across the board, just some companies and sectors," senior Kremlin economic aide Arkady Dvorkovich told Reuters financial television on the sidelines of the St Petersburg Economic Forum. (Reuters)

Russia: the 'island of stability' hits rough waters

• A year ago they strutted proudly at home and abroad and said their nation was an "island of stability" amid the financial turbulence sweeping the world. But Russians in 2009 learned the hard way they too were susceptible to the economic slowdown, with GDP forecast by the government to contract up to 8% this year.
• "No one managed to cover themselves up from a truly global crisis,' Medvedev said during the economic forum in his native city. "Perhaps the only island of stability left that can be described as such is Antarctica," he added. (MSN)

World Bank Says Russian Stock Rally Points to Economic Recovery

• The World Bank is “guardedly optimistic” on Russia’s economy and will publish a revised forecast later this month, said Klaus Rohland, the U.S.-based organziation’s chief representive in the country, in a Bloomberg Television interview today at the St. Petersburg International Economic Forum. The World Bank expects Russia’s economy to contract 6% this year.
• The ruble-based Micex Index of 30 Russian stocks has risen 85% this year. (Bloomberg)

Russia’s VEB Plans to Buy Rostelecom Shares for 230 Rubles Each

• VEB, Russia’s bailout bank, plans to buy OAO Rostelecom shares for about 230 rubles ($7.45) each, Chairman Vladimir Dmitriev told reporters in St. Petersburg.
• The deal may happen before the end of August, Dmitriev said at the St. Petersburg International Economic Forum today. KIT Finance, a brokerage with about 40% of Rostelecom, Russia’s biggest long-distance phone operator, agreed to sell its stake to the government to avoid bankruptcy. (Bloomberg)

RusHydro Shares to Trade in London in July, May List in Asia

• OAO RusHydro Chief Executive Officer Vasily Zubakin said Russia’s biggest hydropower producer expects to list its global depositary receipts in London in “early July,” which may be followed by trading on an Asian bourse.
• The state-run company is allowed to have 14.7% of its stock traded in the form of GDRs, Zubakin said today in an interview at the St. Petersburg International Economic Forum. Less than 2% of RusHydro shares are held as GDRs now. (Bloomberg)

Source: Russia Economic Scan

3 June 2009 | Russia Economic Scan

3-June-2009

Russia Economic Scan

In this edition: Russian natural gas output falls 12% in May, Russia to encourage private sector to assist in funding 2014 winter Olympics, Novolipetsk posts $194m loss in Q1, VEB to issue $2bln bonds, Russian stocks surge over 7%.

Top headlines

Russian May Natural Gas Output Falls 12% on Month

• Russia’s natural gas output fell 12% in May led by OAO Gazprom, as the world’s biggest producer of the fuel cut production on flagging European demand amid the global economic turmoil and warmer weather.
• Russia’s total output fell to 1.29 billion cubic meters a day, or 40 billion cubic meters, from 1.47 billion cubic meters a day in April, the Energy Ministry’s CDU TEK unit said in an e- mailed statement. Output fell 29% compared with May 2008, according to Citigroup Inc. (Bloomberg)

Firms to take up slack as Russia cuts Games cash

• Russia will slash its state budget for the 2014 Winter Olympics by more than $600 million due to the economic crisis but promised that state-controlled companies would make up the difference.
• Russia has pledged $12 billion in private and public money on developing the Black Sea resort of Sochi, where the Games will be held. But cash is becoming harder to find as the financial crisis bites deeper into the economy. (Reuters)

Novolipetsk Posts Loss on Currency, Steel Inventory

• Novolipetsk lost $193.8 million in the first quarter compared with net income of $617.7 million a year earlier, Lipetsk, central Russia-based Novolipetsk said today in a statement. Its margin on earnings before interest, tax, depreciation and amortization slipped to 15% from 36%. Novolipetsk shares fell as much as -7.1% in Moscow trading.
• “Novolipetsk’s results looked disappointing: low-margin, no good in outlook for the market, no positive surprises,” Alexander Pukhaev, an analyst at VTB-Capital in Moscow who has a “buy” recommendation on the stock, said by telephone. (Bloomberg)

VEB of Russia to Sell $2 Billion Bond in Debut Issue

• The sale of one-year notes will be the first of $10 billion of issuance through private transactions with commercial financial institutions and the central bank, according to the Moscow-based lender. VEB, which was the foreign-debt agency in Soviet times, set the coupon on the issue at 2.24%, it said in a regulatory filing today.
• VEB’s note sale will be the second issue in dollars by a Russian borrower this year, after OAO Gazprom sold $2.25 billion of debt in April. Russian companies are struggling to refinance $146.7 billion of foreign debt due in 2009, including $33.6 billion maturing this quarter, after the global financial crisis cut access to funding, according to central bank data. (Bloomberg)

Russian Equities Surge Over 7% Following UBS Reports

• The 50-stock RTS Index added +7.3% to 1,167.42, the most in almost 3 months. The ruble- denominated MICEX Index jumped +7.4% to 1,206.2, closing above 1,200 for the first time since Sept. 8. The ruble strengthened as much as +1.3% to 30.58 per dollar, the highest since Jan. 9.
• "Russia is still a relatively cheap market," Stephen Jennings, chief executive officer at Renaissance Group in Moscow, said Monday. "What we've seen is a return to normality." (Moscow Times)

Source: Russia Economic Scan

31 May 2009 | Russia Economic Scan

31-May-2009

Russia Economic Scan

In this edition: Russia to discuss WTO entry with EU and US, Arctic may hold 30% of undiscovered gas, Russia's VTB will peg management bonuses to stock price, Ruble extends biggest monthly rally since 1995, Russia's Svyazinvest plans IPO after reform.

Top headlines

Russia to discuss WTO entry with EU, U.S. next week

• he European Union, the United States and Russia will hold detailed ministerial talks next week on Moscow's bid to join the World Trade Organization, diplomats said on Friday.
• "This is a shift from the technical level to gauge the temperature at a high political level to see if the outstanding issues can be resolved soon," a diplomat familiar with preparations for the talks told Reuters. (Reuters)

Arctic May Hold 30% of Undiscovered Gas, Strengthening Russia

• The Arctic probably holds 30% of the world’s undiscovered gas and about 13% of the oil, a group led by Donald Gautier of the U.S. Geological Survey said in a paper published in the latest edition of Science magazine. The study was billed as the first detailed estimate of the region’s natural-resource wealth.
• “These findings suggest that the future preeminence of Russian strategic control of gas resources is likely to be accentuated and extended,” Gautier said from in Menlo Park, California, in an audio file posted on Science’s Web site. (Bloomberg)

Russia VTB says to peg bonuses to share price

• VTB, Russia's second-biggest bank, will peg management bonuses to the company's share performance, Chief Financial Officer Nikolai Tsekhomsky told minority shareholders at a Friday meeting.
• "Most likely, this will concern members of the management board and a number of top managers," Tsekhomsky said. (Reuters)

Ruble Extends Biggest Monthly Rally Since 1995; Stocks Climb

• The ruble rose, extending its biggest monthly advance against the dollar since 1995, as oil headed for its best month in a decade. Stocks rallied to the highest level since September.
• Russia’s currency appreciated +1.5% to 30.8610 per dollar in Moscow trading, bringing this month’s gain to +7.5%, the steepest jump since June 1995. OAO Rosneft, the nation’s largest oil company, led the Micex Index to a +4.5% advance. The equity benchmark rose +22% in May, its best month since March 2000 and first six-month rally in seven years. (Bloomberg)

Russia's Svyazinvest plans IPO after reform - CEO

• Russian state-controlled telecoms giant Svyazinvest may hold an initial public offering on Western bourses once its reorganisation is completed, its general director said on Saturday.
• The Russian government on Friday cleared the reorganisation of Svyazinvest under the umbrella of Rostelecom which is designed to increase the holding company's efficiency and reveal the fair value of its assets. (Forbes)

Source: Russia Economic Scan

27 May 2009 | Russia Economic Scan

27-May-2009

Russia Economic Scan

In this edition: Russian economic slide worsens, Putin urges innovation to revive Russia, Russia to buy $10 bln IMF bonds, Russian banks restructured 20% of their loan portfolios, Russian stocks surge on Wednesday.

Top headlines

Russian economic slide worsening

• Russia's economy contracted sharply in April - shrinking by 10.5% from the same month a year ago - Deputy Economy Minister Andrei Klepach has said.
• The data came as officials were quoted as saying Russia would have a budget deficit equivalent to 9% of GDP in 2009, from an earlier 7.4% prediction. (BBC News)

Putin urges innovation to revive Russia

• Russia must focus on technology and innovation to modernize its economy or risk falling behind other world powers, Prime Minister Vladimir Putin said on Wednesday. "We need to move forward, to put the economy on an innovative track," Putin told an audience of business people in Moscow.
• He argued that Russia had "serious competitive advantages" in sectors like space, saying that the country could increase its share of commercial space launches from 40% to around 50%. (AFP)

Russia to Buy $10 Billion of IMF Bonds a Decade After Default

• Russia plans to buy $10 billion of International Monetary Fund bonds to help fellow member states weather the global financial crisis, a decade after the country defaulted on its own ruble debt.
• Russia joins the other so-called BRIC countries, Brazil India and China, in expressing interest in purchasing the IMF bonds as an alternative way to contribute to the Washington- based fund. At the same time, Russia plans to borrow billions of dollars from the World Bank next year to cover a budget shortfall caused by lower oil prices and collapsing tax revenue. (Bloomberg)

Russian Banks Restructured 20% of Loan Portfolios

• Russian banks restructured an estimated 20% of their loan portfolios as of April 1, the central bank’s head of banking regulation and supervision said.
• “Banks are indeed restructuring credits more actively now,” Alexei Simanovsky told reporters in St. Petersburg today at the start of a banking conference. “The question is whether they are doing this in good faith.” (Bloomberg)

Russia Stocks Rise as Oil Tops $63; Rosneft, Novatek Lead Rally

• The 30-stock Micex Index added +1.8% to 1,059.60. The RTS Index advanced +4.1% to 1,030.79. The Russian Depositary Index, measure of global depositary receipts trading in London, rose +3.6%.
• OAO Rosneft, Russia’s biggest oil producer, climbed +3.7% to 190.72 rubles on the Micex Stock Exchange. OAO Tatneft , the oil producer in Russia’s republic of Tatartstan, gained +3.1% to 129.08 rubles. OAO Gazprom, the nation’s largest natural-gas producer, gained +1.1% to 171.71 rubles. Novatek, Russia’s second-largest gas producer, climbed +5.6% to 128.32 rubles, the third-steepest gain in the Micex Index today. (Bloomberg)

Source: Russia Economic Scan

24 May 2009 | Russia Economic Scan

24-May-2009

Russia Economic Scan

In this edition: Russian jobless rate hits 9 year high, Ruble extends longest rally since 2007, Oil price props up Russian economy, Sibir offers Gazprom Neft shares to cut owner's debt, Russian stocks rose over 1% - closed the week up 5%.

Top headlines

Russia recession roars on with jobless at 9-yr high

• Russian data showed it's too soon to call the bottom on the country's first recession in a decade, with unemployment rising to a 9-year high and retail sales slumping for a 3rd month in a row.
• 200,000 lost their jobs last month, pushing up unemployment to 7.7m, or 10.2% of the economically active population. Retail sales fell 5.3% year-on-year, continuing their first contraction in 9 years which started in February. Capital investment shrank 16.2%. (Guardian)

Ruble Extends Longest Rally Since 2007 on Oil, Carry-Trade Lure

• The ruble jumped to as strong as 31.0887 per dollar today, the most since Jan. 12, and gained 3.2% in the week, its 6th weekly advance and the longest rally since September 2007. The central bank bought the most foreign currency on the market in almost a year this week as it sought to control the advance, said Mikhail Galkin, head of fixed-income and credit research at Moscow’s MDM Bank.
• “Oil at $60 is just very good news for the ruble,” said Beat Siegenthaler, chief emerging-markets strategist in London at TD Securities Ltd. “Investors are questioning again which currencies can get them some yield and at the moment Russia has one of the highest yields you can get.” (Bloomberg)

Oil price props up economy

• Oil remains the most important factor for Russian markets and its rise has helped the RTS become the second-best performing market this year, rising 63% since January 11. Despite industrial production falling 16.9% year-on-year in April and the economy remaining in recession, $60 oil has increased positive sentiment towards Russia.
• "It means there are no serious imbalances in the Russian economy," said Roland Nash, chief strategist at Renaissance Capital. "With $60 oil there is no crisis in Russia." (Moscow News)

Sibir Offers Gazprom Neft Shares to Cut Owner’s Debt

• Sibir Energy Plc said it’s selling shares to OAO Gazprom Neft to help ease the debt of former director Chalva Tchigirinski as the oil arm of Russia’s state- run natural gas producer aims to boost its minority stake. Sibir will “immediately” offer about 52.8 million pounds ($84 million) of shares as part of security provided by Tchigirinski, the oil company said in a statement today.
• The offer may help OAO Gazprom, the world’s biggest natural gas producer, to create a crude producer to compete with the world’s largest companies. Gazprom Neft will probably also acquire TNK-BP and OAO Russneft, said Chris Weafer, chief strategist with UralSib Financial Corp. (Bloomberg)

Russian Stocks Rise on Oil, Ruble Rally; Surgut, Sberbank Climb

• The 30-stock Micex Index rose +1.9% to 1,054.03 at the close in Moscow, extending this week’s gain to +5.2%. The index tumbled -5.5% yesterday, its biggest decline in a month. The dollar- denominated RTS Index advanced +1.2% to 1,013.37 today.
• Surgutneftegaz, Russia’s fourth-biggest oil producer, advanced +1.6% to 24.404 rubles, its second gain this week. OAO Rosneft, the country’s biggest crude producer, climbed +2% to 184.44 rubles. Sberbank, Russia’s biggest bank, climbed +3.7% to 39.01 rubles on the Micex Stock Exchange after dropping -6% yesterday. (Bloomberg)

Source: Russia Economic Scan

20 May 2009 | Russia Economic Scan

20-May-2009

Russia Economic Scan

In this edition: S&P says Russian economy to contract 5% and unemployment to hit 12%, Nabiullina says Russian economy may shrink up to 8%, Russia Gazprombank to raise up to $3bln, Russia's MTS sold 15 billion ruble bond, Russian stocks rose 3% on Tuesday.

Top headlines

Standard & Poor’s: Russian economy to contract 5 percent in 2009, unemployment to surpass 12 percent

• Standard & Poor's Ratings Services has predicted Russian GDP will contract 5% and unemployment will exceed 12% in 2009, Frank Gill, the agency's leading analyst for sovereign credit ratings in Russia, Kazakhstan and Ukraine, said.
• Gill said these expectations are extremely uncertain since a great deal will depend on external demand and the terms of foreign trade. He said improvements have been seen in oil prices recently, which provides support to the prospects of the Russian economy. (Kyiv Post)

Nabiullina Says Russian Economy May Shrink up to 8%

• Russian Economy Minister Elvira Nabiullina said the economy may shrink as much as 8% this year, a steeper decline than the ministry forecast in January.
• “The specific contraction numbers could be 4 percent or 6 percent or 8 percent,” Nabiullina said. “We’re doing various calculations, pessimistic and optimistic. We believe much depends on how efficient we are.” (Bloomberg)

Russia Gazprombank to raise up to $3 bln in loans

• Gazprombank, the banking arm of Russian state energy company Gazprom, said on Tuesday it plans to secure up to 100 billion roubles ($3.10 billion) in subordinated loans from shareholders and state bank VEB.
• Gazprombank has reported a net loss of 60.1 billion roubles for 2008, becoming the first major Russian bank to report a loss last year. (Reuters)

Russia's MTS sells 15 billion rouble bond

• MTS, Russia's top mobile phone operator, said on Tuesday it had placed in full a 5-year bond worth 15 billion roubles ($464.5 million).
• The bond, placed with an annual coupon rate of 16.75%, has a two-year put option. (Reuters)

OAO Dixy Group, Norilsk Nickel: Russian Stock-Market Preview

• The 30-stock Micex Index rose +2.9% to 1,041.84. The 50-stock RTS Index added +3.1% to 968.88.
• OAO Dixy Group: Russia’s third-largest listed food retailer is scheduled to publish 2008 financial results today. Dixy rose +3.8% to 123 rubles. OAO GMK Norilsk Nickel: Copper futures rose to a 1-week high as falling inventories and a weakening dollar boosted speculation that demand will increase. Norilsk advanced +6.6% to 3,349.98 rubles. (Bloomberg)

Source: Russia Economic Scan