Russian rouble firm, shares up on sell-off plan

By Andrey Ostroukh and John Bowker

MOSCOW (BestGrowthStock) – The Russian rouble hit a 10-week high versus the dollar on Monday, helped by preparations for local tax payments and a rise in oil prices, while Russian stocks got a boost from the government’s privatization proposal.

Against the dollar, the rouble firmed 3 kopecks to 30.34, after hitting its highest since May 18 of 30.28, according to Reuters data. Against the euro, it weakened 15 kopecks to 39.24.

Oil prices, the rouble’s main driver, held above $77 per barrel on improving risk appetite and fears of disruptions in oil and gas operations in the U.S. Gulf of Mexico during the hurricane season.

The rouble showed no reaction to Russia’s draft plan to sell $29 billion of state assets in the coming three years to bolster the budget. Players were skeptical of whether the plan, which has been aired in the past, would go ahead in the foreseeable future.

“We saw exporters selling foreign currencies in the morning and at the same time the demand (for dollars and euros) was evident, mostly from local banks,” said Mikhail Spolokhov, chief dealer at MDM bank.

Russia’s export-focused companies usually step up conversion of their dollar and euro revenues in the second part of the month to meet domestic tax payments.

Monday’s tax on natural resources and excise duties could total 170 billion-190 billion roubles ($5.61 billion-$6.26 billion), according to Trust bank estimates.

Versus the euro-dollar basket, the rouble gave up 4 kopecks to 34.34, although remaining in the central bank’s intervention zone where it buys $150 million-$200 million a day to ease upward pressure on the rouble, dealers say.

While the external backdrop remains positive for Russian assets, the rouble may be bruised by local demand for foreign currencies, especially for the nominally cheap dollar, they add.

“Many players are being attracted by not high nominal rate of the dollar,” said Spolokhov at MDM.

EARLY TO PRICE IN?

In stocks, the market focused early on Russia’s Finance Ministry proposal to sell state assets in the coming three years to bolster the budget, in what would be the country’s largest sell-off in almost 20 years.

The initial reaction was rather bullish but later in the day players seemed to become more skeptical of whether the plan to sell shares in 10 major firms would come to fruition in the foreseeable future.

“The market does not believe it can happen any time soon. It would require much better market conditions .. not until 2011, or maybe even 2012,” said Chris Weafer, strategist at Uralsib.

Russia’s dollar denominated RTS (.IRTS: ) index was up 1.1 percent while rouble denominated MICEX (.MCX: ) rose 1.24 percent by 10:20 p.m. ET.

Transneft (TRNF_p.RTS: ) was the big winner — up 7.4 percent at one stage before falling back to be up 3.7 percent.

Investors said the company, which transports 90 percent of Russia’s oil, was the most interesting of the assets and could have the biggest price-tag.

“The big one is Transneft — it is potentially a very very interesting asset. It is a huge profitable company that pays dividends,” said Kevin Dougherty, a portfolio manager at Moscow’s Pharos Asset Management.

Investing Advice

(Editing by Ron Askew)

Russian rouble firm, shares up on sell-off plan