Russian business daily Vedomosti.ru reports that the market capitalization of the Russian gas giant Gazprom dropped below USD 100 billion after Tuesday’s close at the London Stock Exchange. In the course of yesterday’s trading, Gazprom’s stock lost 2.7 percent and 1.5 percent at the stock exchanges in London and Moscow, respectively, reducing the company’s value to approximately USD 99 billion. From the beginning of 2013, Gazprom shed 10.2 percent of its value, performing significantly worse than the Moscow’s MMVB index, which dropped by 5.2 percent in the same period. Gazprom remains the largest Russian company in terms of market capitalization and accounts for 12 percent of the total turnover at the Moscow exchange, a share surpassed only by Sberbank.
Vedomosti.ru referred to a statement made by Alexei Miller, Gazprom’s President of the Management Board, in June 2008, when he predicted that Gazprom’s market capitalization will exceed USD 1 trillion within the next 7-8 years, thus making it the most valuable company in the world. Experts state that Gazprom’s poor stock performance is a consequence of lower dividend yields, as well as the failure of positive macroeconomic developments to translate into better financial performance of individual companies. Deutsche Bank’s chief developing market strategist uses this argument to support his continuous bullish sentiment regarding the Russian stock market throughout the past two years. However, some investors sought to increase their portfolio of Gazprom’s shares, such as the Dimensional Emerging Markets Value fund, which increased the value of its stake in Gazprom by USD 130 million in the second half of 2012, bringing the total value of its Gazprom holdings to USD 670 million. There are experts who believe that Gazprom is undervalued, quoting rising gas export volumes and the fact that Gazprom’s long-term gas purchase prices are below current spot gas prices.
The Russian stock market as a whole doesn’t seem too attractive to foreign investment funds that have pulled out USD 700 million from the market during the last quarter alone. During the same period last year, foreign investment funds poured USD 1.3 billion into the market, while the year before that they invested USD 3.4 billion in Russian securities. It should also be noted that while the Russian stock exchange index MMVB lost 5.2 percent of its value from the beginning of this year, London’s FTSE increased by 6.3 percent and S&P reached a new all-time high.