Oil and Metals Shine as RTS Breaks 2,100

The RTS, the country's benchmark stock index, breached the 2,100 barrier for the first time this year, as oil and metal stocks pulled away from the field.

"It does look much better than last month," said James Fenkner, managing director at Red Star Asset Management.

Oil stocks, led by Rosneft and LUKoil, had some of the biggest trading volumes, after Industry and Energy Minister Viktor Khristenko said the government might reach an agreement in two to three months on cutting oil taxes to shore up flagging production.

Metal stocks were buoyed by price gains across the board, while Norilsk Nickel basked in the news that its deal with United Company RusAl -- a prelude to a full merger, which analysts have signaled will dilute minority shareholders' stakes -- may be on shaky ground.

Elsewhere, though, things were looking pretty quiet.

"Outside of those two sectors, there is really nothing going on," Fenkner said. "Retail's dead, telecoms is dead, utilities are dead and dying, banking is dead."

Some investors have been unloading state electricity giant Unified Energy System, which has said Jun. 6 will be its last day of trading, on fears of illiquidity before the shares' suspension. At the time of delisting, minority shareholders will get shares in the spun-off companies.

"There is a reshuffling away from electricity and consumer names to oil and gas," said Denis Obukhov, a portfolio manager at Wermuth Asset Management. "The electricity sector's still pretty attractive in our view ... but it is quite close to the deadline of [UES's] existence, so everybody is quite cautious."

Oil prices rose back to previous highs, pushing past $110 per barrel on lower-than-expected inventories before dropping back slightly. Rosneft rose 4.1 percent on the week, a far cry from last month when it languished about 18 percent lower on MICEX. LUKoil saw its stock rise 3.4 percent on the week, up 20 percent from its March low.

Rising commodity prices also helped Gazprom, which rose 3.5 percent on the week. Alfa said the company could end 2008 as the second-highest global earner, just behind ExxonMobil, on predictions that net income could reach $41.5 billion.

But the biggest movers were the coal companies. "Coal prices are just going crazy," said Fenkner.

Midweek, BHP Billiton said it expected prices of coking coal, a material used in the production of steel, to rise by as much as 240 percent this year. Analysts said prices had risen from around $90 per ton last year to $300 per ton.

Yuzhkuzbassugol saw a one-day gain Thursday of 18.6 percent, while Raspadskaya, which said last week that its concentrate prices had doubled, rose 7.8 percent the same day. Mechel, a steelmaker with coking coal assets, rose 20 percent on the week on the RTS.

The RTS closed down Friday by 1 percent, just keeping its head above the 2,100 parapet. It edged up on the week to 2,112.1 points, a 2.6 percent increase, while the MICEX, where most trading takes place, pared down its gains earlier in the week to creep up 0.9 percent to 1,649 points on the week. It closed down 2.11 percent Friday.