Russian stocks trim weekly gains with Mechel soaring another 30%

MOSCOW, Oct 31 (PRIME) – The Russian stock market increased in the trading week from October 24 through October 28 supported by åðó external background, although lower oil prices limited the growth and depressed the ruble; coal producers led by Mechel were among growth leaders again amid high coal prices.

The MICEX rose 1.23% to 1,981.76, and the RTS grew 0.59% to 992.23 from October 24 through October 28, according to the Moscow Exchange.

At the beginning of the trading week, the market was supported by positive sentiment on the global bourses. In the middle of the week, on October 26, the indices contracted due to falling oil prices. During the last two days of the week Russian stocks were traded almost flat, increasing slightly on October 27 amid rising global bourses and rebounding oil prices, and closing mixed on October 28 in thin trade in anticipation of the results of a two-day meeting of OPEC and other oil-producing countries.

The dynamics of the MICEX at the beginning of this week “may depend on dynamics of oil prices before the start of the trading session on the Russian market,” Irina Rogova, an analyst at the Forex Club group of companies, said, adding that the MICEX may fall back to its technical support level of 1,960 on the back of the fruitless negotiations.

As seen in the data of the bourse, the Russian ruble depreciated to about 63 against the U.S. dollar from 62.3 during the week. The national currency showed no significant reaction to the central bank’s decision to keep the key rate at 10%, Roman Nasonov, an analyst at Promsvyazbank, said. The regulator may raise the rate by 50 basis points only in March, because inflation risks are still high, but the ruble is likely to weaken against the dollar by the next meeting which is scheduled for December 16, the expert said.

CORPORATE STORIES

Metals and mining giant Mechel soared by 31.22% to 153 rubles per common share and 32.16% to 136.14 rubles per preferred share from October 24 through October 28. The company surged by 71.51% per common share and 73.21% per preferred share over the last two weeks.

Coal producer Raspadskaya added 9.71% to 68.5 rubles per common share during the trading week.

Sofya Kirsanova, an analyst at managing company Raiffeisen Capital, said coal companies expect that the coal supply will remain low for six months and prices may stabilize no earlier than in January–March 2017.

Aluminum producer UC RUSAL, which grew 8.83% to 231.8 per Russian Depositary Receipt (RDR), was supported by the news that Russian businessman Mikhail Prokhorov sold a 12% stake in the company for U.S. $700 million, according to Igor Arnautov, an analyst at investment company Veles Capital.

Oil producer Bashneft increased by 12.34% to 3,264 rubles per common share and added 2.18% to 1,497 rubles per preferred share. Vitaly Manzhos, a senior analyst at Bank Obrazovanie, said that the company was supported by the rumors that oil major Rosneft, which has bought a controlling stake in Bashneft from the state recently, may buy back the shares. Moreover, Rosneft has applied to the Federal Antimonopoly Service to raise its stake in Bashneft to 100%, the analyst said.

Russian pharmaceutical company Protek rose by 6.70% to 98.8 rubles in the trading week after its board of directors recommended paying 7.5 rubles per share in dividends for January–September and the company reported that its net profit under the Russian Accounting Standards (RAS) for the period increased by 31% on the year to 4.9 billion rubles.

Magnitogorsk Iron and Steel Works (MMK), whose RAS net profit rose by 16% on the year to 43.468 billion rubles in January–September, grew 6.98% to 30.18 rubles per share.

Russian Grids jumped 8.37% to 0.965 rubles in the trading week. The RAS net profit of the power utility soared to 185.7 billion rubles in January–September from about 3.6 billion rubles in the same period of 2015 due to revaluation of shares of affiliates in January–March.

Russian power holding Inter RAO, whose RAS net profit surged to 37.351 billion rubles in January–September from 6.774 billion rubles in the same period of 2015, rose by 5.63% to 3.36 rubles.

Federal Grid Company of Unified Energy Systems (FGC UES) was also backed by strong RAS results for January–September and increased 2.3% to 0.169 rubles. Its net profit jumped to 26.108 billion rubles in January–September from 4.921 billion rubles in the same period of 2015.

Internet giant Yandex rose 4.66% to 1,270 per class A share. The company released financial results under the U.S. GAAP standards for July–September, which were above market expectations, Arnautov said.

The shares were also propelled by Yandex’ decision to raise the revenue growth forecast for 2016 to 22-24% from 19.22%, Timur Nigmatullin, an analyst at investment company Finam, said.

Russian uncut diamond monopoly ALROSA added 1.98% to 89 rubles. Manzhos said that at the beginning of the trading week, the shares were backed by strong RAS results for January–September: the net profit soared to 102.86 billion rubles against 19.86 billion rubles for the same period of 2015.

At the end of the week, the securities rose on expectations of a second stage of ALROSA’s privatization, Ilya Frolov, head of the stock market analysis department at Promsvyazbank, said.

Rosneft, the privatization of which may also take place soon, increased 1.63% to 349.9 rubles. Economic Development Minister Alexei Ulyukayev said on October 26 that the government will get a 19.5% stake in oil major Rosneft ready for privatization in early December.

Private oil company Lukoil managed to rebound after it released weak financial results and rose 1.07% to 3,104 rubles. In the middle of the week, the company reported that its RAS net profit dropped 70% on the year to 80.215 billion rubles in January–September.

Below are the MICEX’ five most active stocks from October 24 through October 28:

Company	Change, %	Last price, rbl	Trading volume, bln rbl
Sberbank	+0.53	149.20	24.160
Gazprom	+0.03	135.00	8.790
Mechel	+31.22	153.00	7.043
Lukoil	+1.07	3104.00	6.567
Magnit	+0.25	10551.00	5.921

REPORTS THIS WEEK

On Monday, steel producer Novolipetsk Steel (NLMK) will release results under International Financial Reporting Standards (IFRS) for January–September. RUSAL will publish operating results for July–September and metals producer Norilsk Nickel will report operating results for July–September and January–September.

Power producer Enel Russia plans to release IFRS results for January–September on Tuesday and RAS results for the same period on Thursday.

Another company reporting Thursday, Amsterdam-based VimpelCom Ltd. which is the sole owner of Russian mobile operator VimpelCom, will publish IFRS results for July–September.

(62.9037 rubles – U.S. $1)

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