UPDATE 2-China fund buys into Moscow stock exchange sale

Thu Feb 14, 2013 2:20pm EST

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By Olga Popova and Katya Golubkova

MOSCOW Feb 14 (Reuters) - Moscow's stock exchange has attracted foreign investors including China's sovereign wealth fund to its flotation, but the pricing of Friday's sale, expected to value the bourse at $4 billion, is now at the lower end of a forecast range, two financial market sources said.

The success of the Moscow exchange sale is politically and economically sensitive because President Vladimir Putin sees it as a way to help transform Moscow into an international financial centre.

Putin, who will host finance ministers and central bankers from the Group of 20 countries in Moscow on Friday for talks, called last month for all sales of shares in Russian state companies to be held in Russia.

China's sovereign wealth fund CIC and Russia's state private equity fund helped fill the order book for the Moscow exchange sale a day before trading starts, one financial market source said. The source said that the sale was two times subscribed.

Investors from the United States, Britain and Scandinavia also helped the sale to be fully covered, one of the sources said.

The new price range of 55-57 roubles a share was set late on Thursday, which will value the exchange at between $4.0 billion and $4.2 billion, one of the financial market sources said.

The pricing was originally set at between 55 and 63 roubles, with the float seeking to raise around $500 million.

China Investment Corp (CIC) is seeking to match the amount the state-backed Russian Direct Investment Fund (RDIF) is investing, which could see both take around 20 percent of the shares, or around $100 million each, the sources said. One of the sources said CIC was seeking up to 25 percent of the shares.

The exchange, in which Russia's central bank owns 24.3 percent, will list on its own platform under the symbol MOEX.

The Moscow exchange declined to comment.

VTB SALE NEXT

Banking group VTB is next in line in Russia's ambitious plan to privatise state entities and it is looking to raise between $1 billion and $3 billion from a share issue to bolster its capital base.

But the bank has said it might delay the planned sale due to Putin's call to conduct future state asset sales on the country's own stock exchange.

Some analysts have warned that the Moscow stock exchange is too small a venue to raise the capital needed by VTB and a series of state-owned companies, which could depress the price of the shares they aim to sell.

In a separate deal that could see the largest investment into Russia by an Arab sovereign wealth fund, Qatar is reportedly in advanced talks about injecting $3-$3.5 billion into VTB, which is Russia's second-largest bank.

VTB will likely issue the Qataris with $1.5 billion of new equity and $1.5 billion of mandatory convertible bonds under the deal, Britain's Daily Telegraph newspaper reported, citing sources familiar with the matter.

Jason Hurwitz, senior analyst, at Alfa Bank said that if VTB succeeded in raising the reported amount from Qatar, it could end up reducing the size of its expected share sale or even cancelling it.

The Russian central bank's First Deputy Chairman Alexei Ulyukayev, who is a member of VTB's supervisory council, said he had no knowledge of the reported Qatar investment.

"I know nothing about it," he told reporters on the sidelines of the G20 meetings.

VTB declined to comment.

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