Russian equities rose for the first time in four days, led by consumer stocks as MSCI Inc. boosted the weighting of OAO Magnit, the country’s biggest food retailer, in its benchmark index for the country.
The Micex Index (INDEXCF) increased 0.8 percent to 1,389.42 by 10:44 a.m. in Moscow. Consumer services shares led the advance among nine industry groups, adding 2.1 percent. Magnit jumped as much as 5.1 percent, trading up 2.8 percent to 7,330 rubles.
MSCI lifted the weighting of OAO Magnit’s global depositary receipts to 9 percent from 4.7 percent in its Russia 10/40 Index, replacing OAO Mobile TeleSystems’ American depositary receipts and AFK Sistema’s GDRs in the gauge’s top four, according to an e-mailed note from Sberbank CIB. VTB Capital estimates the size of potential fund inflows into Magnit GDRs at $331 million, according to today’s note.
“Magnit is rising on the MSCI reweighting news,” Oleg Popov, who manages about $1 billion in assets for Allianz Investments, the asset management arm of Europe’s biggest insurer, said by phone from Moscow. “Speculators are buying the stock to sell it at a higher price after the rebalancing takes effect to the funds that track MSCI and are forced to adjust their portfolios.”
The volume of shares traded on the Micex was 6.8 percent below the 30-day average, while 10-day price swings increased to 28.802 from 28.762 yesterday. Crude slipped 0.5 percent to $93.71 a barrel in New York.
MSCI reduced MTS’s ADRs and Sistema’s GDRs combined weighting in the 10/40 index to 4.5 percent, according to today’s note from Sberbank CIB. The rebalancing will take effect June 3. MTS rose 0.4 percent to 262.75 rubles. Sistema was little changed at 26.902 rubles.
Magnit surged 2.3 percent to $56.85 in London, while Sistema added 0.2 percent to $19.94.
The Micex tumbled the most in a year on May 23, after manufacturing in China unexpectedly contracted and as concern the U.S. Federal Reserve will crimp stimulus measures curbed appetite for riskier assets.
Russian consumer spending grew less than economists estimated last month, adding to evidence that the economy is losing steam, according to data released on May 24. The central bank kept its main interest rates unchanged for an eighth month in May amid accelerating inflation.
Outgoing Bank Rossii Chairman Sergey Ignatiev has limited room for policy easing with inflation more than a percentage point above target, putting Russia at odds with an international push for monetary stimulus this month. Bank Rossii is scheduled to meet on interest rates in the first half of June, just before Ignatiev steps down to be replaced by Elvira Nabiullina, a former economy minister and aide to President Vladimir Putin, on June 24.
Russia’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.2 times its 12-month estimated earnings and has lost 5.8 percent this year, compared with a 10.5 multiple for the MSCI Emerging Markets Index, which has dropped 2.4 percent in the period.
The dollar-denominated RTS Index (RTSI$) increased 0.7 percent to 1,394.45. The Russian Volatility Index dropped 2.9 percent to 23.46. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. retreated 0.7 percent to 92.01 on May 24.
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