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[loganair] 14/5/2015 09:34

MOSCOW: The Russian central bank has decided to buy currency to replenish its reserves worth US100-US200 million on a daily basis starting from yesterday, May 13, the bank said. "The decision ... was taken considering the normalisation of the situation on the Russian Ruble."

The central bank said it would buy foreign currencies evenly during the day and may change the amount of purchases depending on the situation in the currency market. The central bank, last intervened in the market by selling hard currencies to support the ruble in January.


Oil and ruble still the main drivers. Wednesday turned out to be another volatile day of trading in the Russian stock market, driven by strong ruble movements, strengthening to RUB48.83/$. After opening higher, the RTS index closed up 1.1%, while the MICEX index lost 1.3% as a weakening US dollar and soaring Brent futures allowed the ruble to strengthen.

[loganair] 12/5/2015 09:23

President Vladimir Putin met several European leaders during the Victory Day celebration in Moscow. He noted during the meetings that he believes Russia will be able to restore its relations with the West.

[loganair] 12/5/2015 09:22

Sales decelerate slightly but remains reasonably high at 29% YoY growth in April. On Friday Magnit (JRS 2nd Largest Investment) published a reasonably good trading update for April. Revenues rose 28.7% YoY to RUB76.9 bln ($1.5 bln), which implies growth decelerated 1.7 ppt MoM. Similarly to the previous month, to some extent, the slowdown reflects food inflation slowing to 0.3% MoM from 1.6% MoM in March. Sales at convenience stores rose 25.8% YoY to RUB57.5 bln ($1.1 bln) and sales at hypermarkets increased 21.3% YoY to RUB13.5 bln ($254 mln), while sales at the Magnit family segment expanded 95.4% YoY to RUB3.5 bln ($66 mln).

[loganair] 10/5/2015 12:08

Martin Charmoy, head of Prosperity Capital Management fund in London, predicted that trade between Russia and China will reach $200 billion in the next several years:

Russia and China are quickly becoming close friends, a growing threat to European markets, Martin Charmoy, head of Prosperity Capital Management fund in London, said.

"China needs almost everything Russia produces, and Russia-produced consumer goods are affordable enough."

The analyst also predicted that trade between Russia and China will reach $200 billion in the next several years.

"Russia and China are becoming best friends," Charmoy concluded.

Meanwhile, the analysts said European companies that once were very successful in the Russian market are losing their positions due to sanctions and the geopolitical situation.

"However, Europe should be very careful because Russia is a very important market for it."

This week during the Chinese President Xi Jinping’s visit to Moscow, a wide range of agreements in the trade, economic and energy fields were inked. The main issue on the agenda was an agreement to couple the Eurasian Economic Union and the Silk Road projects.

Last year, Russia’s gas-producing giant Gazprom and Chinese CNPC signed a deal to supply China with 38 billion cubic meters of gas per year over the next 30 years. The total sum of the contract is estimated to be $400 billion, the largest Gazprom contract ever. The gas price is attached to the oil price. The supplies are planned to start in four to six years.

[loganair] 09/5/2015 10:30

Russia Gold Investing - Is Russia Moving to a Gold-Backed Currency? By Geoffrey Pike:

While the IMF still reports the United States as the largest holder of gold reserves by far, these are essentially self-reported numbers. They are not reliable because countries could have incentives to under report or over report their gold reserves.

It is thought by many that China, at least up until this point, has under reported its gold reserves. It seems the Chinese have been accumulating more and more gold over the last several years.

Interestingly, Russia tends to get less attention. It's a smaller economic power than China, but still not to be ignored. The Russian central bank recently announced that it bought 30 tons of gold in March.

According to IMF statistics, Russia is the 5th largest holder of gold, not including the IMF itself. China is just behind Russia, but it would probably jump up the ladder if it reported its true gold reserves.

There was an opinion piece in the Washington Times saying that you should worry because Russia is hoarding gold. I have to disagree. You shouldn’t worry, unless you happen to be a U.S. politician or central banker.

Usually I read stories about how China is going to back its currency with gold and knock out the dollar. In this Washington Times piece, the author talks about a gold-backed currency for Russia.

I don’t discount this as impossible, but it's still highly unlikely at this point.

Russia has politicians and central bankers just like everywhere else. They may feel their backs are against a wall and have less to lose, but it's hard to imagine a bunch of political officials giving up power, unless the population heavily demands it.

Giving up a fiat currency and setting up a gold-backed currency severely limits government power. If followed, it essentially ends the need for a central bank, at least as we know it today. It would be hard to believe that Russian officials would voluntarily do this.

U.S. Politicians Responsible for Russia’s Actions:

It seems that Russian officials are actually doing some rational things these days. The central bank there allowed interest rates to go quite high in order to stabilize the ruble. They have also been selling off U.S. Treasuries, and now we have the story of them accumulating more gold. What's going on?

I believe much of this stems from the tensions between the Russian and U.S. governments. With the situation in Ukraine, U.S. politicians foolishly imposed sanctions against Russia, and in particular, certain Russian officials.

It has actually left Russian officials with few choices. They are basically being forced to abandon using the U.S. dollar in international trade because of the sanctions from U.S. officials.

From February 2014 to February 2015, Russia reduced its reported holdings of U.S. government debt from $126 billion to just under $70 billion. This means it has reduced its holdings of U.S. Treasuries by close to half in the course of one year.

Meanwhile, it seems that Russian officials are taking the opportunity to trade these U.S. Treasuries for more gold. From the standpoint of the Russians, this makes perfect sense. They are certainly going to rely on gold more at this point than promises from the U.S. government, especially when the U.S. government is making it difficult to even use dollars.

I don’t think this is a move to officially back the ruble with gold. It's more likely a move to stabilize the ruble. It may also be a move to poke a stick back at U.S. politicians.

I stated above that you should not be worried. U.S. politicians may have reason to worry. If more countries start doing what Russia is doing, then the U.S. dollar is going to lose power globally. It does not have to be used as a middleman as much as in prior times.

This may hurt the American consumer in the short run, but it would actually be beneficial in the long run. The reason is that it will make it tougher for the U.S. government to run huge deficits.

Right now, there's a global fear that's driving investors into government debt. Despite selling from Russia, interest rates have remained low in the U.S. They are negative in parts of Europe.

But there will come a day when it will be harder for the U.S. Treasury to find buyers of its government debt. The Fed can’t buy forever without risking severe price inflation. If China and Japan ever follow Russia’s lead, then it will make it more difficult for the U.S. government to spend so much money. In the long run, this will help the average American.

Russia is probably not going to issue a gold-backed currency. It's not going to overtake the U.S. economically in any way. However, the Russians can set a good example of smarter economic policies moving forward for some of the other big players such as China and Japan. That includes exchanging U.S. government debt for gold.

[loganair] 06/5/2015 10:41

Russian market rallies despite DM weakness. Russian stocks rallied yesterday, driven by the ruble and oil prices. The ruble strengthened more than 2% despite the CBR’s recent key rate cut, as Brent futures rallied above $68/bbl intraday. The RTS index closed 4.2% higher at 1,072, close to a six-month high.

[loganair] 03/5/2015 11:57

MOSCOW: Russian oil and gas condensate production, among the world's largest, remained at a post-Soviet record level of 10.71 million barrels per day (bpd) in April, underpinned by a recent recovery in oil prices, Energy Ministry data showed yesterday.

Global oil prices jumped 21 per cent in April to over $66 a barrel due to slowing drilling activity and increasing political tensions in the Middle East, having collapsed from a peak of $115 per barrel in June last year.

The price slump has significantly hurt the Russian economy, which relies on oil and natural gas for around half the federal budget revenues.

Russian production of oil and gas condensate, a type of ultra-light oil, stood at 43.830m tonnes in April.

Total Russian oil exports via pipeline monopoly Transneft edged up by 0.7pc to 4.4m barrels per day, or 18.021m tonnes in April.

Russia is aiming to increase its crude oil exports in the coming years and the Energy Ministry expects exports to be 3m tonnes higher this year.

[loganair] 30/4/2015 12:56

Russian Central Bank cut its main lending rate by one-and-a half percentage points on Thursday, responding to a rally in the ruble and signs inflation has peaked.

The bank reduced its one-week minimum auction repo rate to 12.5 percent, a larger cut than the one-point reduction predicted by a majority of analysts.

The possibility that the bank would go for a larger cut had also been anticipated, however, as policymakers have expressed concerns that the ruble was recovering too quickly.

A rate cut of at least one point was widely expected as the ruble has rallied strongly over recent weeks, reducing the need for high interest rates to defend it.

The bank had hiked its key rate by 6.5 percentage points to 17 percent in mid-December in response to a run on the ruble, but it has been steadily reducing them as the situation on the currency market eased. Thursday's cut was the third this year.

The ruble firmed after the Central Bank announcement, having been down prior to the decision, as there had been speculation that the bank would opt for a bigger rate cut. At 10:47 GMT the ruble was at 51.23 against the dollar, still down 0.7 percent on the day.

The bank is also responding to signs that inflation, which hit a 13-year high of 16.9 percent in March, has peaked.

In an accompanying statement, the Central Bank said that inflation was running at 16.5 percent as of April 27. It said that it expected inflation to fall to below 8 percent in 12 months' time and to 4 percent in 2017.

The bank said that economic output would contract in 2015 but attributed this largely to cyclical factors.

It warned that inflation expectations remained high but said it expected these expectations to be lowered as inflation comes down, paving the way for further cuts in interest rates.

"As inflation risks abate further, the Bank of Russia will be ready to continue cutting the key rate," the bank said.

[loganair] 30/4/2015 09:24

Revenues grow 18% YoY, EBITDA margin expands 8 ppt. Yesterday, Phosagro (PHOR LI – Buy) (JRS 12th Largest Investment) published consolidated 2014 IFRS results. They were in line with the consensus expectations. Revenues grew 18% YoY to RUB123 bln ($3.2 bln), EBITDA increased 57% YoY to RUB38 bln ($1 bln), and the EBITDA margin expanded 8 ppt YoY to 31%. Net income of RUB9 bln ($269 mln) in 2013 turned into a net loss of RUB13 bln ($0.3 bln) last year, mainly due to a non-cash FX loss. The BoD recommended dividends at RUB15/share and RUB5/GDR, which implies a modest dividend yield of close to 1%.

[loganair] 29/4/2015 10:43

It seems to me that this year will be a bumper year for dividend payments from Russian companies - wasn't there supposed to be sanctions put against Russia... For those invested in JRS the real concern will be the exchange rate at the time of it's dividend payment, especially if taking the dividend in cash rather than having it automatically reinvestment back into further shares in JRS as, as the rouble exchange rate goes up, meaning higher dividend in sterling terms, so does the JRS share price.

At the moment the current exchange rate is far better at around 80 roubles to the pound compared to the nearly 110 roubles to the pound at the height of the financial crises a few months back. Saying this, is still a long way from the 55 roubles to the pound of just a year ago and 45 roubles to the pound 2 years ago.

[loganair] 29/4/2015 10:33

Russia's second-biggest mobile phone operator Megafon (JRS 8th Largest Investment) said on Wednesday its first-quarter net profit rose 2.4 percent, year-on-year, to 7.4 billion rubles ($143.55 million), boosted by income from cash deposits.

Revenue decreased 1.2 percent to around 74 billion rubles and operating income before depreciation and amortization (OIBDA) fell 1.7 percent to 32 billion rubles, the company said in a statement.

The company’s balance sheet remained strong though, with net debt down 5% QoQ to RUB129 bln.

Megafon also confirmed its guidance for flat revenues in 2015 and the OIBDA margin at or above 40 percent. It recommended paying 10 billion rubles in dividends for 2014, or 16.13 rubles per share.

The company will decide in October on an additional dividend payment with the aim of returning a total of 40 billion rubles to shareholders in 2015, in line with 2014, Megafon added.

[loganair] 27/4/2015 10:19

Korean Air resumed its Seoul Incheon – St Petersburg Pulkovo Airport service yesterday (26. April 2015). The thrice weekly connection with A330-200 equipment was not in the winter timetable. The South Korean carrier still flies to/from Moscow Sheremetyevo five times per week, in addition to St Petersburg.

[loganair] 27/4/2015 10:10

Russian meat producer Cherkizovo (JRS 10th Largest Investment) approved a dividend payout of 54.6 roubles per ordinary share, or 2.4 billion roubles ($46 million) in total.

In 2014, Cherkizovo paid out a dividend for the first time, earmarking 34.44 roubles per share, or a total 1.5 billion roubles, from its 2012 and 2013 profits.

The latest payout equates to 18 percent of net profit made last year by the largest meat and feed producer in Russia and one of the top three companies serving Russia's poultry, pork and sausages markets.

The company has been one of few winners from a ban on Western food imports imposed in retaliation for sanctions slapped on Russia over the crisis in Ukraine.

[loganair] 27/4/2015 09:33

Ruble remains in focus. Friday turned out to be another volatile session on the Russian stock market. After a strong opening, the RTS index closed 0.9% higher and MICEX added 1.2%, again driven by the ruble and the oil price. The strengthening Brent futures pushed oil names higher, as the local shares of Rosneft (up 3.7%), Surgutneftegas (up 3.4% - JRS 3rd Largest Investment), and Lukoil (up 2.0% - JRS Largest Investment) outperformed the market. The ruble remains strong as the tax-payment period is not over yet. However, the Central Bank will assess the key rate at its meeting on Thursday and the consensus is for a 1 ppt cut; moreover, the strong ruble and improved inflation situation may force the CBR to reduce the rate by more 1 ppt, which would lead to ruble depreciation. This morning has started on a positive note for Russia, helped by firm oil prices, as Brent futures are trading above 65$/bbl. The ruble is also stronger this morning, trading beyond RUB51/$.

[loganair] 24/4/2015 15:19

The government expects a mild recession and a quick recovery … Yesterday Economy Minister Alexey Ulyukaev said that the government's outlook for the Russian economy this year has moderately improved. The Economy Ministry now expects the economy to contract just 2.8% in 2015 compared to the previously expected 3% contraction. According to Ulyukaev, real GDP contracted 2.2% YoY but grew moderately on a seasonally adjusted basis in March. The key factors behind the improvement in the economy were better trade terms and relative stability in the financial markets, as the ruble has reached its fair value and inflation has decelerated. As a result, the economic situation now appears less gloomy than was expected by many experts at the start of the year. Because of this, the government improved its medium-term forecasts for several key indicators. The government now believes that the economy may start to recover in 2H15 and begin growing around 2% per year on average in 2016-18. Capital investment is now projected to grow 3% in 2016 due to the rebound in private investment activity, while retail trade is expected to grow 1.4% next year as consumer demand improves due to falling inflation. The economy is expected to fully recover from the current crisis in 2017-18.

[loganair] 23/4/2015 10:12

Good 1Q15 results - EBITDA 3% above expectations. Magnit (JRS 2nd Largest Investment) published 1Q15 results yesterday. Profit exceeded market expectations. Revenues increased 33% YoY to RUB219 bln ($3.5 bln), in line with the previously published trading update. Gross profit increased 32% YoY to RUB59.0 bln ($950 mln), implying that the gross margin contracted 0.2 ppt YoY to 27.0%. EBITDA rose an impressive 37% YoY to RUB20.4 bln ($328 mln), exceeding consensus expectations by 2% and implying that the EBITDA margin expanded 0.2 ppt YoY to 9.3%. Net income rose 36% YoY to RUB9.5 bln ($152 mln), somewhat better than expectations, and implies that the net margin was effectively flat YoY at 4.3%.

It seems to me that retail spending is holding up well in Russia and the sanctions are hurting Europe far more than they are Russia, is exactly what my experience on the ground in St Petersburg is also telling me.

[loganair] 22/4/2015 14:37

Further article about Russian gold Buying in March - this article is by Lawrence Williams:

According to a Russian central bank announcement on its latest gold reserve position it appears that it added 1 million ounces of gold (31.1 tonnes) to its holdings in March after a two month hiatus, bringing its total reserves to 39.8 million ounces (1,237.9 tonnes). There had been speculation that the nation had been cutting back on its gold purchases due to the economic difficulties it had appeared to face due to the falling oil price and western sanctions. However the lack of any increase in the early months of the year is a pattern we have seen before – but now the March rise is the highest seen since last September when the bank added 1.2 million ounces (37.3 tonnes) which itself was the largest monthly total in 16 years. The big March gold reserve rise could thus be a signal that the Russian central bank is strongly back on its gold buying spree.

Russia may, in this way, be trying to demonstrate to the West that sanctions are just not having much, if any, effect on the domestic economy. Indeed it could also be trying to influence some of the more reluctant European nations, which have been calling for sanctions to be relaxed because they may be hurting them more than the target nation through loss of significant trade, and thus create divisions in the united sanctions imposition. That Russia’s economy is more resilient than the sanctions imposers may have thought has also been seen in a strong recovery in the Russian ruble which has rebounded 24% from its almost 70:1 low point against the dollar of February, although it is still some 30% plus down against the greenback on its level of mid 2014. But an important proportion of this will also have been due to the strength of the dollar against most other currencies over the same period.

The news of the latest Russian gold reserve addition confirms the World Gold Council prediction that overall central bank gold reserve rises will continue at a strong rate this year – and there is also speculation by Bloomberg that China may also confirm a big rise in its reserve by as much as 2,500 tonnes or more in the months ahead as it jockeys to try and have the yuan accepted by the IMF as a part of the make-up of a revised Special Drawing Rights basket – although as we have pointed out here before this is something which could be vetoed by the US as not being in its interest given its 16.75% blocking voting interest in significant IMF decisions.

Russia’s central bank’s strong gold buying pattern in recent years – it bought around 150 tonnes last year and 77 tonnes in 2013, is being seen as a potential geopolitical weapon and a way of adding credibility to its currency position. This is in the face of what it sees as a major attack on it by the US-led West over its moves seemingly designed to destabilise the new Ukraine government and persuade it not to link up with the EU and NATO which it sees as a threat to its security.

[loganair] 21/4/2015 16:46

By Mark O'Byrne - Russia buys one million ounces and increases gold reserves by another 2.6% in March.

Russia increased its gold holdings by one million ounces in March, bringing its total reserves to nearly 40 million ounces or 1,238 metric tonnes. The Russian one million ounce gold purchase is a large one even by Russian standards as in recent years they have consistently been buying roughly 300,000 ounces per month.

It followed a two month break from the gold market which had led to erroneous speculation that Russia was not interested in increasing its gold reserves any further.

Since 2005, Russia’s gold reserves have increased three-fold. As a comparison, in the second quarter of 2009, Russia only had 550 tonnes of gold in its official reserves meaning that their reserves have doubled in recent years.

Russia’s gold reserves are now at least the fifth largest national gold reserves in the world.

Russia has consistently dollar cost averaged into gold throughout the global financial crisis and since the recent geopolitical crisis over Ukraine, their gold accumulation has increased.

In the last nine months of 2014, in the midst of sanctions and the collapse in oil prices which led to sharp falls in the rouble, the central bank continued to buy gold, demonstrating the vital strategic importance placed by the government of Russia on the precious metal.

The strategy has proven prudent as gold has acted as a hedge and protected Russia’s reserves from the declining value of the rouble and indeed the declining value of the euro.

The ongoing accumulation of official gold by Russia is part of a reserve diversification strategy. Gold is held by central banks as one of their key reserve assets alongside foreign exchange assets including dollars and euros, and also IMF Special Drawing Rights (SDRs).

Some Russian analysts point to the threat of continued western sanctions on Russia as a renewed catalyst for the Russian central bank diversifying out of dollars and euros by increasing its gold reserves.

There is also the strong possibility that Russia is coordinating gold reserve accumulation with ex-Soviet States as we warned of last August.

Given very close economic ties and cooperation between Russia, Kazakhstan and Belarus, and a trajectory towards economic union, it is probable that these and other ex-Soviet countries are coordinating monetary policy which would include a common approach to official gold reserves accumulation.

This will be worth watching in the coming months and years. Like China, it is possible that Russia and its allies may not be fully reporting their gold reserves accumulation to the IMF.

It is not obligatory that they do so and given the very frayed relationship with Washington it seems likely that at some point the Russians may adopt the Chinese stance and not provide data on their gold buying to the IMF.

The People’s Bank of China (PBOC) does not telegraph its intentions or gold purchases to the market as doing so would lead to a surging gold price and to a further devaluation of its foreign exchange reserves.

Aren’t the Russians likely to follow suit and either not declare or partially declare their gold reserve accumulation?

[loganair] 21/4/2015 10:07

All about the ruble - Market driven by sharp ruble movements. The Russian market was again driven by ruble movements yesterday. The RTS index gained 1-2% in the first half of the session, as the ruble strengthened after weakening on Friday. However, in the second part of the day, the ruble lost its intraday gains after the Central bank raised the repo rates. That was the second rate hike in April, making it expense to borrow foreign currency from the CBR. As a result, the RTS index reversed intraday gains and closed 0.3% lower.

[loganair] 21/4/2015 10:05

Ruble close to fair value, but risks remain high - The risks for the ruble remain on the downside. After the sharp depreciation in November-January on falling oil prices, large foreign debt payments, and massive capital outflows, the ruble has appreciated strongly over the past few weeks. Quite surprisingly, the ruble has ignored fundamentals as it appreciated despite falling oil prices in March-April. The market thus believes that the ruble was driven by an inflow of foreign speculative money, because despite the risks linked to the oil price and geopolitical factors, Russian assets appeared quite attractive. At the same time, it is clear that the risks on the oil market are to the downside, due to the potential Iranian supply, as sanctions against it will probably be lifted soon, and high inventories, which create additional downside risk for oil prices. the market maintains its medium-term oil-price forecast of $60/bbl; however, volatility is likely to increase on the oil market in the next few months.

[loganair] 21/4/2015 10:03

Sistema use to be JRS 7th Largest Investment before the share price completely fell out of bed to a low of under 10 roubles per share. However JRS retained it´s holding in Sistema. Over the past few months Sistema´s share price has over doubled.

Reasonable dividend recommended - AFK Sistema (SSA LI – Buy) announced yesterday that its BoD recommended a dividend of RUB4.5 bln ($86 mln), or RUB0.47/share. For GDRs, this translates into a dividend of RUB9.4/GDR ($0.18 at the current exchange rate), implying a dividend yield of 2.4% at yesterday's closing price. The record date for the dividend is scheduled for 16 July. The dividend should be approved by the AGM on 27 June. The record date for participating in the AGM is set for 15 May.

[loganair] 20/4/2015 09:56

The Russian market tumbled on Friday in response to the ruble's sharp decline and weakness in the international markets. The RTS index lost 5.9% and the ruble weakened 5.0% by the close of trading, even though Brent futures were trading above $64/bbl. Domestic stories were among the main losers as MegaFon GDRs lost 7.8% and Magnit shares fell 5.7% in London. Bank stocks also suffered, with Sberbank GDRs dropping 6.7%. A weak batch of data on the Russian economy in March released at 16.00 Moscow time only steepened the decline. In macro data releases from Russia on Friday, real disposable incomes fell 1.8% YoY, 0.4 ppt more than expected, while PPI rose to 13%, while it was expected to come in at 8.5%. In addition, retail sales fell 8.7% YoY.

[loganair] 20/4/2015 09:54

Capital investment dynamics moderately improve … On Friday Rosstat published key economic indicators for March. The capital investment dynamics improved, with investments dropping just 5.3% YoY in March after falling 6.5% YoY in February, beating market expectations of a 7.1% YoY decline. Considering the dramatic devaluation of the ruble in late-2014, the market was expecting a double-digit drop in capital investment in March.