Russia Stocks Rise 2nd Day as ECB Rate-Cut Bets Boost Sberbank

Russian stocks rose for a second day, erasing earlier declines, amid bets the European Central Bank will cut interest rates to fuel growth in the country’s biggest trade partner. OAO Sberbank, the nation’s biggest lender, advanced.

The Micex Index (INDEXCF) added 0.2 percent to 1,339.91 at the close in Moscow, after falling as much as 1.2 percent. Russian equities have the cheapest valuations on an estimated price basis among 21 emerging markets tracked by Bloomberg. Sberbank jumped 1.5 percent to 96.44 rubles, the most in two weeks.

The 14-day relative strength index for Micex rose to 23.5, still below 30 that signals the gauge is oversold and may be set for a rebound. Euro-area services and factory output shrank for a 15th month in April, according to Markit Economics, fueling expectations the ECB will take action to revive the recession- hit economy.

Russia is rising, although in a weak way, as the global sentiment improves on expectations of the ECB rate cut,” Dmitry Malykhin, who oversees $30 million in Russian assets as chief investment adviser at Moscow-based hedge fund DV Advisers LLC, said today by phone. “Sberbank is definitely gaining on this.”

OAO Rostelecom slid 4 percent to 111.36 rubles, the steepest percentage decline on the Micex. Mikhail Prokhorov’s Onexim Group said that it may consider buying a stake in the phone operator from Marshall Capital after the fund annulled its deal with Arkady Rotenberg.

Rosneft, TNK-BP

Sberbank has the third-largest weighting on the Micex at 14.4 percent. The shares added 1.8 percent to $12.23 in London, the most since April 8.

VTB Group, Russia’s second-biggest lender, added 2.5 percent to 4.55 kopeks, increasing for a third day. VTB’s depositary receipts advanced 2.5 percent to $2.845 in London. OAO Lukoil, the second-largest oil producer, rose 2.1 percent to 1,899.10 rubles.

OAO Magnit, the biggest food retailer, dropped 1.8 percent to 6,281.20 rubles. The GDRs retreated 1.3 percent to $48.81.

OAO TNK-BP Holding (TNBP) surged as much as 8 percent before closing 3.3 percent higher at 45.94 rubles. Chief Executive Officer Igor Sechin said today OAO Rosneft is willing to work with TNK-BP Holding’s minority investors. Proposals include directing all profit to dividends, Sechin said.

Rosneft’s plan not to buy out minority stakes in TNK-BP, to borrow money from it and possibly end its dividend policy sent shares of TNK-BP tumbling the most on record on March 26. Investors including Prosperity Capital Management Ltd., which manages about $4 billion of Russian assets, said Rosneft is putting Russia’s reputation at risk.

Norilsk Cut

Crude, Russia’s chief export, dropped 0.3 percent to $100.12 per barrel in London. Most metals retreated in London after a preliminary report showed China’s manufacturing may be expanding at a slower pace this month.

China’s preliminary reading of 50.5 in a Purchasing Managers’ Index, a gauge of manufacturing activity that was released by HSBC Holdings Plc and Markit Economics, compared with a final reading of 51.6 for March.

OAO GMK Norilsk Nickel, the world’s largest producer of the metal, sank 1.3 percent to 4,925 rubles. The stock was cut to underweight, the equivalent of sell, at Morgan Stanley on lower commodity prices, according to a note released today. The GDRs lost 1.6 percent to $15.53.

The S&P GSCI Spot Index of commodities retreated 0.4 percent. The dollar-denominated RTS Index (RTSI$) added 0.4 percent to 1,333.89.

The number of shares traded on the Micex was 8.4 percent above its 30-day average, while the gauge’s 10-day price swings rose to 13.27.

The measure trades at 4.9 times its 12-month estimated earnings and has lost 10 percent this year, compared with a 10.1 multiple for the MSCI Emerging Markets Index (MXEF), which has dropped 4.7 percent in the period.

The RTS Volatility Index, which measures expected swings in stock futures, slipped 3.3 percent to 23.66 after surging 4.8 percent yesterday. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, lost 0.2 percent to 25.61 today, while the Bloomberg Russia-US Equity Index (RUS14BN) added 0.5 percent to 90.31.

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

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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