The Week’s Emerging Market Winners: Russia & Natural Gas
Emerging markets have staged a comeback this week, and Russia funds are the big winners.
A natural gas pressure gauge.
The leveraged Direxion Daily Russia Bull 3x Shares exchange-traded fund (RUSL) is up 38% this week, the SPDR S&P Russia ETF(RBL) is up 14% and the Market Vectors Russia ETF (RSX) is up nearly 12%. TheiShares MSCI Emerging Markets ETF(EEM) is up 6% this week.
Among individual Russian equities that trade in the United States, Sberbank (SBRCY) jumped 32%, Lukoil (LUKOY) rose 19%, andGazprom (OGZPY) rose 17%. Pavel Molchanov, an energy analyst at Raymond James, notes some Gazprom news on compressed natural gas (CNG) and liquefied natural gas (LNG):
“Westport Innovations (WPRT) and Russia’s state-controlled gas giant Gazprom [Thursday] signed a preliminary market development agreement to expand the use of natural gas vehicles in Russia. As it stands, this is a virtually nonexistent market in Russia: according to NGV Global, Russia had only 90,000 such vehicles as of 2012, well below Armenia and Peru. This agreement is part of Gazprom’s plans to grow its compressed natural gas (CNG) capabilities, as the company anticipates domestic CNG fuel consumption to grow from virtually zilch currently to 1.0 Bcf/d by 2020. The adoption curve for LNG fuel is at an even earlier stage. As one of the world’s top three gas producers and exporters, there is no reason why Russia could not develop a meaningful CNG/LNG fuel market. But, similar in some ways to North America, the NGV value chain just doesn’t have much of a history there. It’s worth noting that Gazprom is actively seeking new outlets for its surplus gas, bearing in mind that the European Union’s aggregate gas demand is near a 20-year low. Put another way, it’s not an issue of trying to be more “green” – Russia already has low carbon intensity per capita – but rather Gazprom aiming to boost the domestic gas market.
Westport’s shares are up nearly 10% today, and Gazprom shares are up nearly 1%. See our recent posts: Gazprom Downgraded, Lukoil Favored As Cheap Oil Drains Profits, Dividends andIs Russia Strangled By Low Oil Prices?
