by winston » Thu May 08, 2008 5:10 pm
If one is interested in Russian stocks, there is a Lyxor Russia listed in HK ( 2831 )..
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Russia Stocks Cheapest in Europe on Higher Inflation
By William Mauldin
May 8 (Bloomberg) -- Russia's stock market is telling Dmitry Medvedev that investors are losing confidence as inflation accelerates and taxes curb profits at the nation's biggest oil producers.
Russia's RTS Index is off to its worst start to a year since 1998, when the government's $40 billion default sent equities around the world tumbling. The 50 companies in the RTS, dominated by energy producers, through yesterday traded at an average 9.52 times estimated earnings, the lowest among Europe's 10 biggest stock markets and a 29 percent discount to the MSCI Emerging Markets Index, according to data compiled by Bloomberg.
The combination of the quickest inflation in five years and a 45 percent increase in oil taxes spurred the benchmark RTS Index's 3.1 percent decline this year. While former President Vladimir Putin presided over eight years of economic growth and a 14-fold increase in the RTS, Medvedev, his handpicked successor, inherits a stock market that's performing worse than Brazil, Mexico, Taiwan, and South Africa.
``For the new Medvedev-Putin administration, inflation is the biggest challenge,'' said Ian Hague, founding partner at Firebird Management LLC in New York, which has $1.5 billion of its $3.5 billion emerging-market assets in Russian equities. ``And those who think that by buying Russian oil stocks they're going to capture the oil windfall are kidding themselves.''
The RTS rose 2.2 percent yesterday as Medvedev, the chairman of OAO Gazprom, took over the presidency, and added 0.9 percent to 2,220.7 as of 12:34 p.m. today in Moscow.
Gazprom Overtakes GE
State-run Gazprom, the biggest natural-gas producer, overtook General Electric Co. as the world's fourth-largest company by market value after Medvedev became Russia's third president.
The RTS trades at a 17 percent discount to the U.K.'s FTSE 100 Index, which is valued at 11.5 times estimated profit. France's CAC 40 trades at 11.3 times and Germany's DAX at 11.8.
OAO Rosneft, Russia's largest oil producer, has underperformed the MSCI Emerging Markets Energy Index by 41 percentage points since it went public in 2006. The Moscow-based company trades at 11.8 times profit, compared with a ratio of 13.3 for Beijing-based Cnooc Ltd., China's largest offshore oil producer.
Rosneft has been hurt by inflation because of rising equipment, infrastructure and wage costs, Peter O'Brien, the company's chief financial officer, said in an interview last month in Moscow.
Lukoil Shares
OAO Lukoil, Russia's second-biggest oil producer, trades at 7.32 times estimated profits after underperforming the MSCI Emerging Markets Energy Index by 41 percentage points in the past two years. The Moscow-based company is valued at a 34 percent discount to the 11.1 price-to-estimated earnings ratio for MSCI's gauge of oil and gas producers in developing markets.
In addition to inflation-related expenses for energy companies, the export duty on oil has risen 45 percent this year and will be set at $398.10 a metric ton, or about $54 a barrel, on June 1.
Medvedev, 42, pledged yesterday to fight inflation as he was sworn in. The government may formulate a plan in two months for tax cuts on oil companies to overcome production ``stagnation,'' Energy and Industry Minister Viktor Khristenko said in an interview in April.
Societe Generale Asset Management bought Lukoil and Rosneft this year because they may benefit from tax reductions and are cheap. Goldman Sachs Group Inc. raised Lukoil to ``buy'' this week because of the possibility that oil prices will rise to between $150 and $200 a barrel within two years.
`At the Beginning'
A tax reduction on oil is ``more likely to happen earlier rather than later,'' said Nerea Heras, who managed the $280 million eastern Europe fund at Societe Generale in London before leaving in April for Madrid to help oversee Banco Santander SA investments in eastern Europe and other emerging markets. ``You have to do it at the beginning of a new term.''
Medvedev may increase taxes on other commodity producers to compensate for lower oil revenue. That probably would mean earnings at Moscow-based OAO GMK Norilsk Nickel, Berezniki, Russia-based OAO Uralkali and Solikamsk, Ural Mountains-based OAO Silvinit would suffer, according to Alexei Zabotkin, chief investment officer at United Capital Partners in Moscow.
``There will be redistribution of taxation in the commodity sector away from oil and toward other resources,'' said Zabotkin, whose firm manages $1.5 billion in Russian stocks and private equity.
Norilsk, Russia's biggest mining company and the supplier of everything from nickel and palladium to platinum and copper, is valued at 6.79 times estimated earnings, compared with 12.7 times for the MSCI Emerging Markets Materials Index.
Soybeans, Alfalfa
Uralkali, the Russian company developing the world's second-largest deposit of potash -- used to fertilize corn, wheat, soybeans and alfalfa -- and Silvinit, Russia's biggest potash producer, are trading at more expensive valuations as global shortages cause food prices to soar. Uralkali is valued at 25.5 times estimated profit, while Silvinit has a ratio of 53.4.
At the same time, OAO RusHydro, the world's second-biggest hydroelectric generator, may be ``impacted negatively'' as the government debates whether to let utilities raise domestic power prices at the risk of boosting inflation, Credit Suisse Group, Switzerland's second-largest bank, said in a note this week.
RusHydro, based in Moscow, trades at 13.1 times earnings, according to data compiled by Bloomberg, compared with 14.6 times earnings for the MSCI Emerging Markets Utilities Index.
Last edited by
winston on Fri May 09, 2008 2:47 pm, edited 1 time in total.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"