CORRECTED-UPDATE 1-Russian stocks fall further after weak Megafon debut

Thu Nov 29, 2012 10:12am GMT

Related Topics

(Corrects Chris Weafer's title in the 10th paragraph)
    * MICEX, RTS down in global worries
    * Megafon shares down on debut trading
    * Rouble weakens on oil

    By Maya Dyakina
    MOSCOW, Nov 28 (Reuters) - Shares in Russia's number two phone operator
MegaFon fell on their first day of trading on Wednesday after an initial public
offering was priced at the bottom of its guided range, adding to a sour mood on
Moscow stock markets.
    The rouble, which had firmed by nearly 2 percent during over two weeks of
local tax payments, weakened along with international prices for Russia's main
export, oil.
    The poorly received MegaFon launch added to concern over a fiscal deadlock
in the U.S. and the oil price slide, pushing Moscow's rouble-denominated MICEX
share index and the dollar RTS index down by 0.7 percent and more
than one percent respectively by 1312 GMT.
    MegaFon  priced its offering at $20 per GDR, raising $1.7
billion. The shares declined on the first day of trading in
London and in Moscow, reflecting investor caution given the poor subsequent
performance of some previous Russian IPOs.     
    "People got full allocations and hedge funds made up a significant portion
of the book - that's a bad sign because they flip," said one equity salesman in
Moscow, referring to the strategy of short-term speculation.
    Another market source confirmed that hedge funds were selling at this stage.
   
    State-controlled telecoms operator Rostelecom was the biggest loser of the
day, its shares falling by 5 percent. The company's CEO and a minority
shareholder have recently been investigated in a fraud probe. 
    Shares in MTS - MegaFon's main rival - fell 0.8 percent.
    Still, Angelika Genkel, a senior analyst at Alfa Bank, said MegaFon
depositary receipts could get a considerable boost in demand from index-linked
institutional investors if the stocks are included in the MSCI Russia index in
the index revision scheduled for Nov. 30.
    Chris Weafer, chief strategist at Sberbank Investment Research, said that
investors have been deterred by uncertainly over Europe's debt, Chinese growth
fears, and the ongoing budget negotiations in the United States.
    Trading volumes on the Moscow stock exchange have remained subdued in recent
months, with investors focusing on individual companies with strong dividends.
    The rouble weakened on Wednesday, reacting to a decline in oil prices
, losing 0.4 percent against the dollar at 31.2. The
rouble was flat against the euro at 40.17, and was 0.2 percent
down at 35.21 against the euro-dollar basket. 
    The rouble has firmed by nearly 2 percent during a two-week long tax payment
period, which prompted export-oriented companies to convert revenues to meet
local liabilities.
    Now, with the tax payment period over, banks are betting on a downward trend
in anticipation of a seasonal boost in budget spending.
   "The rouble tends to be weaker in December and the first quarter than the
rest of the year," analysts at Bank of America Merrill Lynch wrote in a note. 
   "In our view the primary reason is the pattern of liquidity injection through
the budget, which tends to pick up in December, and takes the first months of
the year to be mopped up." 
    However, the impact of this seasonality should be lower than previously, as
budget spending was more balanced throughout the year.       
 Russian Markets                           Latest     Net  % Change  % Change
                                                   Change             on year
 STOCKS                                                                      
 MICEX                                    1384.81  -10.06     -0.72    -1.24 
 RTS                                      1401.47  -16.13     -1.14     1.42 
 London ADRs                               805.45   -4.88     -0.60     3.47 
 Emrg Mkt Indx                             989.01   -7.43     -0.75     7.92 
 MSCI Russia                               743.69   -6.04     -0.81     0.94 
 Sberbank                                   87.84   -1.36     -1.52    11.39 
 VTB                                         0.05   -0.00     -0.85   -12.51 
 Gazprom                                   138.05   -0.25     -0.18   -19.41 
 LUKOIL                                   1901.80  -10.70     -0.56    11.71 
 Rostelecom                                111.21   -4.88     -4.20   -26.84 
 Dollar/Rouble                              31.15    0.12      0.39    -3.10 
 Euro/Rouble                                40.17    0.01      0.03    -3.76 
 Rouble basket                              35.21    0.07      0.21    -3.44 
 DEBT                                         Bid     Ask      %Rtn    Coupon
 Russia 10-yr bond                           7.08    7.05     -0.13      7.60
 MONEY MARKET                                 Bid     Ask     Close          
 Overnight rate                              6.49    7.00      6.38          
    
    TABLE FROM POWER PLUS PRO
    
All data taken from Reuters at 1312 GMT

 (Writing by Maya Dyakina, additional reporting by Douglas Busvine and Sonia
Elks; Editing by Ruth Pitchford)
FILED UNDER: