Russia has for the first time given a clear timeframe for removing curbs on foreign ownership of shares in gas giant Gazprom, a move that will make it the world's biggest emerging markets stock.
After years of delays and false starts, parliament's energy affairs committee approved the proposed changes, and its chairman, Valery Yazev, said on Wednesday the measures would have their first reading in the State Duma lower house on November 23.
"Gazprom is extremely undervalued, and one of the reasons is the lack of a liberalised market for its shares," Yazev said. "Our legislative proposal, once passed, will open the way for a substantial growth in Gazprom's capitalisation." When the curbs are removed Gazprom will at a stroke become the biggest stock in the Morgan Stanley Capital International (MSCI) global emerging market index, compared with a weighting now that is barely above zero percent.
That in turn would lead to a doubling of Russia's weighting in the emerging markets investment universe and make Gazprom stock a must for investors managing $3 trillion in assets whose performance is measured against the MSCI benchmark. "It is all finally happening," said Eric Kraus, chief strategist at Sovlink Securities. "President Vladimir Putin has given his blessing to this idea and made it clear he wants it done."
Gazprom's local shares were unchanged in a weaker market at 143.4 roubles ($4.97), valuing the company at $118 billion. Its London-listed proxy shares, equivalent to 10 locals, eased 0.9 percent to $58. Separately, Russian agencies quoted Deputy Economy Minister Andrei Sharonov as saying the Justice Ministry was due to sign off on the reform this week.
To liberalise the shares the government needs to legalise holdings bought by foreigners before 1997, then amend the Law on Gas Supplies to allow foreign ownership, and finally to ease rules covering which exchanges Gazprom shares may trade on.
Sharonov said a draft government order on the reform as well as the draft presidential decree giving the green light to the liberalisation was now at the Justice Ministry. He said both had already been agreed by other authorities. Until now financial markets had been worried about possible delays to the liberalisation, after Deputy Prime Minister Alexander Zhukov said it would only happen in 2006.