Russian ETF, GDR Gains Signal Stocks Will Surge After Holiday, Sell-Off
Russian stocks and the ruble are poised to rebound from their worst sell-off in 10 months when trading resumes after yesterday’s public holiday, based on gains in global depository receipts and an exchange-traded fund.
The Russian Depositary Index of equity-related securities traded in London yesterday soared as much as 11 percent to 1,651.29, as Europe’s rescue package to countries facing instability boosted appetite for riskier assets and commodities surged. The Market Vectors Russia ETF, which holds 44 Russian- linked securities and trades in the U.S., climbed 11 percent to 31.7125.
“Stocks are set to go ballistic on the basis of news deeply reassuring to European investors, but faintly irrelevant for Russia,” Eric Kraus, a strategist at Otkritie Financial Co., said in e-mailed comments.
The 16-nation euro region agreed to offer as much as 750 billion euros ($962 billion), including International Monetary Fund backing, to stop the debt crisis from worsening, and the European Central Bank said it will buy government and private debt. Russia’s benchmark Micex Index tumbled 10 percent last week on concern Europe’s deficit crisis will slow the world’s economic recovery, damping demand for raw materials.
The extra yield investors demand to own Russian debt over U.S. Treasuries shrank 58 basis points yesterday, according to JPMorgan Chase & Co.’s EMBI+ Indexes. Exchanges in Russia were closed yesterday for a holiday.
Oil, Russia’s main export, surged yesterday more than 4.5 percent in New York, its biggest jump since September. Copper, nickel and aluminum advanced in London.
A key technical indicator signaled equity gains for the first time since 2008. Micex’s relative strength index dropped to its lowest level in more than 1 1/2 years, according to Auerbach Grayson & Co. The 14-day RSI sank to 26.2 on May 7, below the threshold of 30 that indicates a rally, according to technical analysts. When the RSI was last below 30 on Oct. 28, 2008, the Micex surged as much as 63 percent in five trading days.
Russian stocks, the world’s best performers last year as an economic recovery boosted the earnings outlook of oil and metals producers, have retreated 16 percent from their April 15 peak.
The MSCI Emerging Market Index of 22 developing countries, which ended last week down 12 percent from its high in April as investors fled riskier assets, rose 4.5 percent yesterday.