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