Russia RTS in Bull Market on Stimulus Optimism, Rates Meeting

Russia’s RTS Index (RTSI$) gained, sending the gauge up more than 20 percent from this year’s low on bets central banks will boost economic growth and as investors awaited the monetary policy committee’s meeting in Moscow.

The RTS Index jumped 0.3 percent to 1,476.44 by the close in Moscow, the highest level since May 10. The gauge hit a low on June 1. The Micex Index (INDEXCF) rose 0.3 percent to 1,478.83, the highest since April 20. OAO Mechel (MTLR) climbed 1.7 percent as the coking-coal producer signed a supply agreement with OAO RAO ES Vostok, a power holding company in Russia’s Far East. OAO Novatek dropped 2.5 percent, the biggest decliner, after OAO Gazprom halted natural-gas purchases from independent producers.

China’s imports unexpectedly slid and industrial output rose the least in three years, signaling more stimulus may be needed. The U.S. economy added less workers than expected last month, a report showed on Sept. 7. Russia’s central bank holds a policy meeting Sept. 13.

“The Russian market is waiting for big stimulus actions from China and the U.S.,” Ovanes Oganisian, a strategist at Troika Dialog in Moscow, said by phone. “If the Russian Central Bank decides to hike rates, foreign investors could see it as a move to curb inflation, which will be good.”

The U.S. Federal Reserve will hold its policy meeting Sept. 12-13 to discuss whether to expand asset purchases, known as quantitative easing. Fed Chairman Ben S. Bernanke said on Aug. 31 that weak hiring posed a “grave concern” and bond purchases are an option.

Rates Meeting

Bank Rossii has sought to hold inflation at 5 percent to 6 percent this year. The Economy Ministry last month raised the inflation forecast for this year to 7 percent from between 5 percent and 6 percent. The central bank has held its refinancing rate at 8 percent, a quarter-point above the record low, since December.

Breaching the 6 percent inflation target may force the hand of policy makers in Russia, the last major emerging economy to keep borrowing costs unchanged this year.

Consumer prices rose 5.9 percent from a year earlier in August, the highest level since December, from 5.6 percent in July.

“The central bank, having thought things over, will leave rates unchanged this week, and the market realizes this,” Julia Tsepliaeva, head of research at BNP Paribas in Moscow, said by phone. “However, the trend of unchanged rates will soon come to an end. Inflation is starting to speed up and in September will likely exceed the central bank’s target.”

Standard & Poor’s GSCI Index of raw materials gained 0.3 percent to 678.74.

Rosneft Climbs

OAO Rosneft, Russia’s largest oil producer, climbed 0.6 percent to 202 rubles as the Russian government approved increasing dividend payments to 25 percent of net income, Deputy Prime Minister Arkady Dvorkovich said in a Twitter Inc. message on Sept. 7.

The Micex trades at 5.6 times estimated earnings and has rallied 5.5 percent this year. That compares with a multiple of 10 times and a 6 percent advance for the MSCI Emerging Markets Index.

Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.

Global Woes

Crude fell less than 1 percent to $96.30 in New York. Oil and gas contribute about 50 percent to Russia’s state revenue.

Heads of the Asia-Pacific Economic Cooperation Summit in Vladivostok, including Chinese President Hu Jintao and Chilean President Sebastian Pinera, spoke of the dangers the European debt crisis poses to their economies.

Hu said in a Sept. 8 speech to the summit that China’s economic growth faced “notable downward pressure” in part because of slowing export growth and the sovereign debt crisis. Pinera, who signed a free-trade agreement with Hu yesterday, said in an interview that he is concerned about the impact the European debt crisis and slow U.S. growth is having on the Chilean economy.

“There is a certain worry about the development of the global economy, especially given the big problems in the European Union and the U.S.,” Russian President Vladimir Putin told reporters at the close of the summit, held at a new university campus on an island near Vladivostok. “The Asia- Pacific region is the locomotive of the global economy.”

The Russian government spent more than $20 billion to showcase Vladivostok, 4,000 miles east of Moscow, as leaders gather for this week’s APEC summit.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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