Russian Stocks Drop as Lack of China Deal Ends Gazprom Rally
Russian stocks fell, with OAO Gazprom ending a nine-day rally, as President Vladimir Putin’s visit to China failed to produce an announcement of a gas-supply deal.
The Micex Index (INDEXCF) declined 0.2 percent to 1,411.47 by 11:24p.m. in Moscow after rising as much as 0.8 percent. Gazprom sank 1.8 percent to 145.40 rubles per share after gaining 18 percent in its longest rally since at least January 2006, when it started trading on the Moscow Exchange.
Gazprom has surged as traders interpreted Putin’s visit as a sign Russia is close to getting a long-term gas-supply contract it has sought for a decade. As Putin’s visit started, no deal was signed, and presidential spokesman Dmitry Peskov said the sides are still working on the price.
“Gazprom leads Russia down as no progress on the Chinese deal has been reported,” Vyacheslav Smolyaninov, a strategist at UralSib Capital in Moscow, said in e-mailed comments. “The market has been giving recently every benefit of the doubt to Gazprom as the Chinese contract was one of the most important triggers.”
Russia’s benchmark index trades at 5.2 times estimated 12-month earnings, the cheapest valuation among 21 emerging markets tracked by Bloomberg. Gazprom is trading at three times estimated earnings this year.
A deal with China, subject to pricing and other terms, may give the Russian government global gas-market dominance and the chance to reduce reliance on Europe for revenue. Its value for Gazprom shareholders is “limited”, unless the price exceeds $11 per million British thermal units, Timur Salikhov, an analyst at BCS Financial Group, said in an e-mailed note.
Some investors may sell on the news “almost regardless of which price they end up with,” UralSib’s Smolyaninov said.
To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net
To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net Chris Kirkham, Matthew Brown
www.bloomberg.com/news//2014-05-20/...-ends-gazprom-rally.html
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