By Eric Onstad
LONDON (Reuters) - International financial groups took action on Wednesday to distance themselves from the shares, bonds and metal of Russian aluminium giant Rusal after the United States imposed sanctions on the company.
In Moscow, Russian Prime Minister Dmitry Medvedev said his government should look at U.S. goods or goods produced in Russia by U.S. companies when considering a possible response to the sanctions.
Shares of United Company Rusal, one of the world's biggest aluminium producers, will be deleted from global equity and debt indexes while its metal will not be allowed on the London Metal Exchange (LME) and the CME Group.
The U.S. Treasury on April 6 announced sanctions against seven Russian oligarchs and 12 companies they own or control, saying they were profiting from a Russian state engaged in "malign activities" around the world.
This included Oleg Deripaska and his Hong Kong-listed company Rusal and his newly created holding company En+ Group
The two companies will be deleted from FTSE Russell's equity indexes effective from the open on April 13, the index provider said in a statement.
Rusal's shares in Hong Kong have slumped by half since the sanctions were imposed on Friday and gave up another 1.9 percent on Wednesday.
DEBT, METAL EXCLUDED
On the debt front, Rusal will be excluded on April 30 from JPMorgan's CEMBI index group of emerging market corporate bonds, the U.S. bank said.
The exclusion will be done as part of the end-of-month rebalancing of the indexes, it added.
As of Friday, April 6, Rusal has a weight of 0.12 percent and 0.15 percent in the CEMBI Broad Diversified and CEMBI Diversified indexes respectively, JPM said in a statement seen by Reuters that was sent to clients late on Monday.
Moody's said it was withdrawing all ratings for Rusal due to its own business reasons.
"At the time of withdrawal the ratings were: corporate family rating of Ba3 and probability of default rating of Ba3-PD At the time of withdrawal these ratings had a positive outlook," it said in a statement.
Rusal's aluminium brands are being excluded from the LME, the world's biggest market for industrial metals, and the U.S. Comex exchange owned by the CME.
The CME revoked approved status for Rusal's metal for delivery against CME aluminium futures contracts, effective from April 10, a notice on the CME website said.
The London Metal Exchange said late on Tuesday Rusal's aluminium would be suspended from its list of approved brands from April 17 after some members raised concerns about settling contracts with sanctions-hit companies.
Aluminium prices extended their rally on Wednesday to a sixth straight session, hitting an 11-week peak, amid persistent worry about shortages.
Analysts at CRU say Rusal accounts for 14 percent of aluminium supplies outside top producer China. Global output this year is estimated at 65 million tonnes.
"There's a lot of panic and uncertainty. Buyers are scrambling to try to replace where they can, to plug the gap left by not having Russian-origin metal," said Robin Bhar, head of metals research at Societe Generale in London.
The sanctions have had knock-on impact on precious metal palladium, which has surged 6 percent this week on the back of concerns about supply from number one producer Russia.
Although the supply pipeline of the metal, more than two-fifths of which is sourced in Russia, has not been directly hit by the sanctions, the market has been rattled by the inclusion of Deripaska on the blacklist.
Deripaska's Rusal owns a 28 percent stake in Norilsk Nickel, the world's biggest palladium producer.
(Additional reporting by Claire Milhench, Sujata Rao-Coverley, Jan Harvey and Pratima Desai in London; Polina Devitt, Polina Nikolskaya and Vladimir Soldatkin in Moscow, Swati Verma in Bangalore and Melanie Burton in Melbourne; Editing by Richard Balmforth)
Disclaimer: No Business Standard Journalist was involved in creation of this content
