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. Last Updated: 07/27/2016

Business in Brief

RTS Breaks 640



MOSCOW (Reuters) -- Russia's benchmark RTS index closed 3.1 percent higher at 640.53 points on Tuesday, its third record closing high this month.

The previous all-time closing high was 628.98, reached last Wednesday after Moody's Investors' Service awarded Russia an investment grade rating for the first time.

Tuesday's top blue-chip gainers were metals giant Norilsk Nickel and national power monopoly Unified Energy Systems.




$40Bln Under Radar



MOSCOW (MT) -- Individuals and businesses failed to report some 1.25 trillion rubles ($40 billion) in earnings in 2002, a senior official at the State Statistics Committee said in an interview published Tuesday.

The size of the shadow economy rose in absolute terms last year, but it expanded at the same pace as the official economy, holding steady at 22.5 percent of gross domestic product, the committee's first deputy chairman, Alexander Surinov, told the weekly Moskovskiye Novosti.

Surinov said some 40 percent of unreported earners are hired laborers like nannies, bodyguards and house cleaners, while another 40 percent consists of doctors, auditors and other professional and technical workers. The remaining 20 percent comes from unregistered small businesses, he said.




Mortgage Securities



MOSCOW (MT) -- The law on mortgage-backed securities passed the State Duma in its second and third readings Tuesday, potentially paving the way for a much needed expansion of the credit market.

The bill, which still needs to pass the Federation Council and be signed by President Vladimir Putin, could spur a boost in lending and provide flexibility to Russia's rigid labor market, said Alexei Moisseyev, fixed income analyst at Renaissance Capital. The financial system currently suffers from a dearth of assets, he said.

But it will take at least six months to a year before the bill's regulatory implementation and perhaps even longer before individuals could take advantage of it, he said. In order to function, the mortgage market will need more experienced specialized agencies that would package the securities.

Bankers have long demanded a more robust structure for lending against collateral. "Historically, it has been difficult to do in Russia, because if there is a default, finding a way to reclaim the collateral or the loan is hard," said Michael Workman, head of fixed equities at Trust investment bank.

Under the new law, only licensed mortgage and credit lenders would be allowed to issue mortgage-backed securities.




Reiman to Head North?



MOSCOW (Prime-Tass) -- Communications Minister Leonid Reiman may be appointed presidential representative to the Northwest Federal District, Vedomosti reported Tuesday quoting three government sources.

On Wednesday, the former presidential representative in the Northwest Federal District and newly elected St. Petersburg Governor Valentina Matviyenko takes up office, and Reiman is expected to be officially named the new presidential representative, Vedomosti said. Ministry officials declined to comment.




$76M Hermitage Deal



HELSINKI, Finland (Reuters) -- Finnish construction firm Lemminkainen said Tuesday it had won a 65 million euro ($75.93 million) building deal with the State Hermitage Museum in St. Petersburg, sending its shares to all time highs.

Lemminkainen stock was up 2.5 percent at 16.50 euros, off a life-peak of 17.20 euros hit earlier but still outpacing a weaker Helsinki bourse. The share is now trading at levels last seen in January.

"In addition to art repository and restoration facilities, the new complex will include training and exhibition areas, laboratories, a library and a separate customs building," Lemminkainen said in a statement.




LUKoil Stock Options



MOSCOW (Reuters) -- LUKoil said Tuesday it would increase exports and grant managers stock options to help its shares catch up with those of its industry rivals.

Spokesman Dmitry Dolgov said the board would meet on Oct. 16 in the Black Sea port of Burgas in Bulgaria, where LUKoil has a refinery, to discuss the issue and revisit a strategy to boost foreign sales of crude oil and products.

He declined further comment. Interfax quoted LUKoil investor relations chief Gennady Krasovsky as saying the board would discuss granting share options to management in an attempt to boost its market value.

Analysts say LUKoil is heavily undervalued compared with YukosSibneft in terms of production to market value.

YukosSibneft will produce 2.35 million barrels per day this year, while LUKoil is expected to produce 1.6 million bpd.




LUKoil Upgrade



LONDON (Reuters) -- LUKoil had its corporate credit rating raised Tuesday by one notch to BB from BB- with a stable outlook, ratings agency Standard & Poor's said.

"The rating action recognizes the general improvement in the operating and fiscal environment for Russian oil companies, and following clarifications of LUKoil's financial policy, reflects our expectation that the group will keep credit ratios in line with its new rating in a mid-cycle scenario assuming a Brent price at $18 per barrel," Standard & Poor's credit analyst Eric Tanguy said in a statement.

"It is supported by LUKoil's historically sound cash flow generation, management's ongoing measures to improve overall cost structure, and a focus on increasing exports and returns."




Finns Buy Timber



HELSINKI, Finland (Reuters) -- The world's top paper and board maker Stora Enso plans to increase its purchases of timber in Russia, the Baltics and Eastern European countries, Finnish business daily Kauppalehti reported Tuesday.

During the next few years, the company will mainly locate any new sawmills in Russia and has plans for building one in Siberia with an annual capacity of 350,000 cubic meters to 400,000 cubic meters, a company official told Kauppalehti.

The value of the planned Russian investment would be some 50 million to 60 million euros ($58.4 million to $70.1 million).

"During the next two to three years, we will be growing in Russia as fast as possible," said Arno Pelkonen, senior executive vice president for the company's timber products unit.




Rice for Iraq



HANOI, Vietnam (Reuters) -- Vietnam, the world's third-largest rice exporter, has signed a contract to sell 75,000 metric tons of 5 percent broken rice to Russia, which in turn will ship the grain to Iraq, traders said Tuesday.

They said state-run Vietnam Southern Food Corp. (Vinafood 2) would load 15,000 tons of the rice this week while the remaining 60,000 tons would be shipped early next year.

"A delegation from Vinafood 2 visited Russia recently to sign the deal there," a trader in Ho Chi Minh City said. He said Russia has committed to sell rice for Iraq, but it has to buy from other countries due to insufficient quantity. Vinafood 2 is Vietnam's biggest rice exporter.

In April, Itar-Tass quoted Agriculture Minister Alexei Gordeyev as saying Russia planned to supply 500,000 tons of grain to Iraq within six months.

Traders said a ship was scheduled to arrive Wednesday to load the first batch of 15,000 tons.




New EADS Office



MOSCOW (Prime-Tass) -- The European Aeronautic Defense and Space Co. has established a Russian Technology Office in Moscow as part of its corporate research arm, EADS said Tuesday.

EADS and the Russian Academy of Sciences have signed an agreement outlining opportunities to work together on technical cooperation, the company said.




3 New MTS Regions



MOSCOW (MT) -- No. 1 cellphone operator Mobile TeleSystems said Tuesday it had acquired stakes in three regional telecoms, giving it licenses to operate in three new regions -- Volgograd, Astrakhan, and Mary El.

MTS bought a 50 percent stake in Astrakhan Mobile, 50 percent in Volgograd Mobile and 80 percent in Mar Mobile GSM.

The new stakes give MTS licenses to operate in regions with a combined population of 4.4 million, making its coverage available to 128.3 million people, or 88 percent of the population, the company said in a statement.