The Micex Index (INDEXCF) added 0.7 percent to 1,459.03 by the close in Moscow. The dollar-denominated RTS Index (RTSI$) rose 0.7 percent to 1,489.34. VTB Group and OAO Sberbank, Russia’s biggest lenders, rallied 1.8 percent and 2.6 percent, respectively.
Cyprus’s plan to rescue its economy through a tax on deposits drove Russian shares to a three-month low on March 18. While Moody’s Investors Service said VTB is “most exposed” to the country’s credit crisis, the lender sees its direct losses as “insignificant,” First Deputy Chief Executive Officer Vasily Titov told reporters in Moscow today. Russia’s Finance Minister met his Cypriot counterpart for loan talks in Moscow today.
“The direct effect of VTB’s subsidiary on the parent is marginal, the stock is bouncing back,” Natalia Berezina, an analyst at UralSib Capital, said by phone. “The problem is that the Cyprus situation is complicated and unclear and VTB remains the most risky asset in this situation.”
Luxembourg Finance Minister Luc Frieden called for the 17 euro-area finance ministers to reconvene “as soon as possible” to cobble together a new package. The European Central Bank, whose Governing Council meets today in Frankfurt, will also have to decide whether to give Cyprus more time or consider cutting off liquidity to the country’s banks.
Russian lenders and companies had about $31 billion placed in Cypriot banks or their own units at the end of 2012, according to a report from Moody’s March 13. At least $30 billion in further exposure comes in bank loans to Cypriot companies of Russian origin, the ratings company said.
A double-tax avoidance treaty and lower tax rates have made Cyprus a conduit for Russians moving money into and out of their country. Cyprus is both the biggest direct investor into Russia and the biggest recipient of Russian investment abroad, according to Russian central bank data.
VTB may lose “only tens of millions of euros” in Cyprus, it said in a statement on its website today. The planned deposit tax levy is “unprofessional, dangerous and endangers the financial stability of the European and global economy,” it said in the statement.
Other lenders with Cypriot units include Sberbank and OAO Gazprombank (GZPR), Otkritie Capital, which is part-owned by VTB, as well as Aton Capital, UralSib Financial Corp., OAO Promsvyazbank and BCS Financial Group.
The Russian Depositary Index (RDXUSD) increased 1.2 percent to 1,687.61, led by depositary receipts of Sberbank and VTB, which rose 3 percent and 2.8 percent respectively.
“It goes without saying that the main area of interest, concern and risk will remain the passage of the latest Eurozone bailout,” Chris Weafer, Sberbank CIB’s chief strategist, said in an e-mailed note. “Investor sentiment and, therefore, attitude toward risk, will remain sensitive to any developments or comments from political leaders.”
The number of shares traded on the Micex was 29 percent above the 10-day average and 10-day price swings spiked to 23.082, the highest since Jan. 14, data compiled by Bloomberg show.
Oil, Russia’s main export earner, added 0.2 percent to $92.35 a barrel in New York, after losing 1.7 percent yesterday. Crude and natural gas account for about 50 percent of Russia’s budget revenue.
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, gained 1.4 percent to $27.90 today. The RTS Volatility Index, which measures expected swings in the index futures, rose 0.8 percent to 21.80.
The Standard & Poor’s GSCI Index of raw materials added 0.1 percent to 643.94. The Bloomberg Russia-US Equity Index (RUS14BN) of the 14 most-traded Russian stocks in the U.S. increased 1.3 percent to 98.06.
The Micex trades at about 5.4 times estimated earnings and has lost 1.1 percent this year. That compares with a multiple of 10.5 times for the MSCI Emerging Markets Index, which dropped 2.7 percent over the same period.
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