Monday, 5 April 2010

Russian markets ride oil price wave

Russia's exchanges threatened to hit their highest level since August 2008, giving a boost to companies coming back to Russia's IPO market after two high-profile deferrals.

Moscow's MICEX closed at 1480.17 on Friday, riding on a wave of risk appetite following better than expected employment data in the US and oil touching $85 a barrel.

Venezuelan Oil Minister Rafael Ramirez said Friday during Prime Minister Vladimir Putin's visit that oil had established a floor of $75 a barrel, and prolonged high energy prices will provide a further boost to Russian equities and the economy.

"Oil futures closed near $85 p/bbl on Nymex and ICE and now appears to have established a new trading range in the $80's p/bbl rather than the $70's [a barrel]," Chris Weafer, chief strategist at Uralsib, wrote in a note to investors.

The winning streak will also be a boost to pharmaceutical producer Protek, which last week announced it was seeking to raise $400 million in an IPO in May or at the beginning of June.
Protek's listing, which will be held jointly on Russia's MICEX and RTS indexes, will also please the country's Federal Financial Markets Service (FFMS), which has come under fire from bankers for restricting access to foreign capital.

At the beginning of the year the FFMS slashed the limit which Russian companies could list abroad by 10 per cent, down to 25 per cent, in an effort to force firms to stay at home and boost Moscow's claim as a financial centre.

Bankers, however, say the new listing laws could do the opposite and send companies abroad in search of fresh international capital to inject into their debt-laden companies.
"Either companies will be reluctant to list, or they will have listings in Russia that will not encourage the value of the company to be returned to shareholders," said Tom Mundy, a strategist at Renaissance Capital. "Or they will find ways of creating structures abroad to allow them to list."

While the bankers say they can understand the government's desire to turn Moscow into an international financial hot-spot, the infrastructure and legislation aren't in place to
attract sufficient foreign capital to Russia.

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