Custody Newsletter № 2017/23 57.64 Kb, 22 June 2017
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SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly Presented by: VTB Bank, Custody June 22, 2017 Issue No. 2017/23 Economy Russian central bank cuts key rate to 9% from 9.25% On June 16, 2017 it was stated that the Russian central bank reduced the key rate to 9.00% from 9.25% as inflation remained close to the target level, inflation expectations were falling, economic activity was recovering although some medium-term inflation risks remained. The central bank said it needs to retain a moderately strong credit policy in order to keep inflation close to the target but sees room for a further key rate reduction in July-December. Inflation stood at 4.1% annually in May. The ruble rate is stable, and its influence on inflation has decreased. The short-term inflation risks, connected with the oil price dynamics have diminished after OPEC and non-OPEC oil producers prolonged their output reduction deal. Medium- term risks have remained high as oil prices are still lower than expected. There is also a rising structural deficit of skilled workforce in Russia, which is why salary growth can exceed labor productivity. A possible change of the consumption model to a spending-focused one can destabilize inflation. Inflation expectations are sensitive to changes in prices for some products and the ruble rate. Possible tax changes can accelerate inflation temporarily. The economic activity is restoring as investments and industrial production are increasing, and the consumption by households is growing. Taking these trends into account, the central bank has increased its 2017 gross domestic product growth forecast to 1.3-1.8%. In the future, only structural changes of the economy can push the growth rate beyond 1.5-2.0%. Company News Tatneft boosts stake in Bank Zenit to 71.9% On June 16, 2017 it was reported that Russian oil company Tatneft raised its stake in Bank Zenit to 71.8992%. Tatneft now holds 62.6678% in the bank directly and 9.2314% indirectly through subsidiaries Tatneft Oil AG, based in Switzerland, and Zenit Investment Services Inc, based on the British Virgin Islands. In February, the shareholders of the bank approved boosting the bank’s charter capital by RUB 14 bln through an additional share offering. The shares will be placed privately in favor of Tatneft. ESN Group buys 65% stake, debt of RBC from Onexim Group On June 19, 2017 it was announced that businessman Grigory Beryozkin’s energy investment company ESN Group acquired a 65% stake and debt of media holding RBC from tycoon Mikhail Prokhorov’s Onexim Group without disclosing the sum of the deal. Russia’s Federal Antimonopoly Service earlier cleared application of Sotol Project, an ESN Group unit, to buy 65.43% voting shares in RBC and 80.463% in RBC Online, which focuses on advertising. Sistema directors ask Putin to intervene in Rosneft suit On June 19, 2017 Kommersant business daily reported that independent directors of multi-industry holding Sistema asked Russian President Vladimir Putin to pay attention to RUB 170.6 bln suit filed by oil major Rosneft against the company. Rosneft filed the suit in May seeking to recover the loss stemming from 1 Sistema and its unit Sistema-Invest’s alleged asset stripping of oil company Bashneft in 2009-2014, when they owned a controlling stake in it. In the letter, Roger Munnings, former head of the Russian subsidiary of KPMG; former Luxembourg’s Economy and External Trade Minister Jeannot Krecke; former European Trade Commissioner Peter Mandelson; and Meade Hall & Associates’ founder Patrick Clanwilliam said that Sistema shares plunged 37% following the suit and the company’s capitalization fell RUB 143 bln. The suit is groundless and irrational, as Rosneft demands compensation for usual corporate procedures done in compliance with law and calculates claims in foreign currency, basing the final claim on the ruble depreciation. The suit also hurts the Russian investment climate, as it increases risks and decreases predictability of the business environment in the country, the business daily reported. But President Vladimir Putin’s spokesman Dmitry Peskov said that the Kremlin sees no danger for the Russian investment climate from the suit. According to Peskov the dispute between Rosneft and Sistema, it is being implemented in the legal framework, and the president is in no way able to interfere in the process. It is being done purely in the legal system and it would be incorrect to speak about any kind of its influence on the investment climate. The letter also says that the suit shows the wish of some state companies to expand its influence on the economy and the business climate regardless of methods and consequences of the actions, hurting internal competition and investor trust. The directors asked Putin to help in settling the dispute and hoped for a fair trial at court. Rosneft spokesman Mikhail Leontyev said that public position of the independent directors is vulnerable as Sistema while only pretending that it is Bashneft’s owner bled it dry in the most cynical and shameless way. Russia’s Association of Professional Investors sent a similar letter to Putin on June 6. In it, Chairman of the Association’s Board of Directors Alexander Branis asked the president to study whether the government should looking into the situation and use mechanisms of working with state-controlled companies and the business community to support an out-of-court settlement. Peskov said that only court would be able to issue a final verdict if no other solution was found. This is the world practice, including the business world, and it is absolutely normal. Gazprom board approves RUB 4 bln capital injection in subsidiary On June 19, 2017 the board of directors of Russian gas giant Gazprom approved an increase of capital of its 100% subsidiary Gas-Oil by RUB 4.381 bln to RUB 14.306 bln. Rostelecom CEO Oseyevsky has no plans to buy operator’s shares On June 19, 2017 president of Russian state-controlled telecom operator Rostelecom, Mikhail Oseyevsky, who headed the company in March, said he had no plans to buy the operator’s stocks on the market unlike his predecessor Sergei Kalugin. The executive will still receive the operator’s shares under the management incentive program. Rostelecom’s management board will consider on June 20 a new incentive program that will not be applied to all employees of the operator, unlike the current program. Kalugin, who headed the operator since 2013 until March, purchased Rostelecom’s shares several times, saying that he wanted to underline his own interest in the company’s success. He owned 0.4532% of Rostelecom’s capital as of the end of 2016 and received in March a premium of 0.03% of common stocks. Rostelecom traded at RUB 70.06 per common share and RUB 54.90 per preferred share in Moscow as of 4 p.m. Moscow time on June 19. Novatek buys back 22,720 common shares in June 12-16, 2017 On June 19, 2017 it was reported that independent gas producer Novatek bought back 22,720 common shares, including shares held in the form of global depositary receipts (GDRs), from June 12 through June 16. In May, the board of directors extended a USD 600 mln buyback program, under which the company will buy its shares and GDRs via its unit Novatek Equity (Cyprus) Limited, until June 7, 2018. Russian Rosseti exercises early redemption option On June 20, 2017 it was stated that state-controlled power grid operator Rosseti redeemed RUB 5 bln worth of BO-01 bonds early in order to optimize the group’s credit portfolio. The bonds were sold on June 22, 2015 at 11.9% annually and envisaged an early redemption option. Rosseti now has four bond issues totally worth RUB 26 bln in circulation. Official says Altaivagon to become part of Rostec On June 20, 2017 Viktor Meshcheryakov, deputy head of the Altai Region’s government, stated that Russian railcar maker Altaivagon, which halted production a month ago, was expected to become part of state corporation Rostec and resume operations without disruptions. The decision was made after a conflict 2 between Altaivagon and Uralvagonzavod, when the first one proposed producing rail cars by RUB 600,000 cheaper than the rivals, but failed to receive permission. Court calls data on Rosneft rejecting suit against Sistema error On June 21, 2017 a representative of the Arbitration Court of the Republic of Bashkortostan said that information that oil major Rosneft rejects its RUB 170.6 bln suit against multi-industry holding Sistema was published due to a technical malfunction. On June 20, a document saying that Rosneft and its co-claimant oil company Bashneft filed a request to reject the suit was added to the register, and the request had been registered, but Rosneft press secretary Mikhail Leontyev denied the information. Rosneft filed the suit in May seeking to recover the loss stemming from Sistema and its unit Sistema-Invest’s alleged asset stripping of oil company Bashneft in 2009-2014, when they owned a controlling stake in it. Initially, the company’s claims amounted to RUB 106.6 bln, but later raised it to RUB 170.6 bln due to differences in currency exchange rates. Rostelecom to hire broker to trade VTB bonds On June 22, 2017 it was announced that Russian state-controlled telecom operator Rostelecom wants to hire VTB Capital Broker, a unit of investment company VTB Capital, as a broker for five years with a RUB 300 mln contract. The broker will trade VTB Bank one-day exchange discount inconvertible bonds on the Moscow Exchange.