Gazprom to become largest stock in MSCI Emerging Markets Index

OAO Gazprom's weighting in the Morgan Stanley Capital International Emerging Markets Index will almost double in September, when the world's biggest natural-gas producer becomes the largest component of the benchmark. The state-run Russian company will increase to 5% of the index's value in September from 2.6%, according to MSCI yesterday. „Gazprom will be a proxy for the entire Russian market, the one stock an investor would buy to get exposure to Russia,” said Ian Hague, who manages $1.2 billion in Russian stocks at Firebird Management LLC in New York. Gazprom has been one of Firebird's largest holdings, according to Hague. Shares of the Moscow-based company have jumped 56% this year as gas prices soared and Russian President Vladimir Putin removed a ban on foreigners owning the stock. Since 2004, Gazprom's market value has surged fivefold to $277 billion. The company surpassed Microsoft Corp., the world's largest software maker, in April. It's bigger than every other publicly traded company in the world except Exxon Mobil Corp. and General Electric Co.
Gazprom will surpass Samsung Electronics Co., the world's second-largest semiconductor maker, as the biggest component in the emerging-market index. Samsung, based in Suwon, South Korea, accounts for 3.9% of its value, according to MSCI. Created out of the Soviet gas ministry in 1991, Gazprom holds 16% of the world's known gas reserves. Its output of 547.2 billion cubic meters last year is equivalent to 9.42 million barrels of oil a day, about as much as the daily output of Saudi Arabia, the world's biggest crude oil supplier. The higher weighting will raise Russia's representation in MSCI's index to 11.1%, making it the third-largest emerging market worldwide, according to MSCI. Russia, which is currently No. 6, will trail only South Korea and Taiwan. „We expect the reweighting to support both the Russian market in general and Gazprom specifically in coming weeks,” Andrew Howell and Geoffrey Dennis, strategists at Citigroup in New York, wrote in an Aug. 11 report. „Many emerging markets investors are underweight and will likely be forced to raise exposure over time.” (Bloomberg)