Russian equitites rallied from a five-week low yesterday as OAO Novatek, the country’s largest non-state natural gas company, climbed on speculation an extended share buyback program will support the stock.
The Micex Index (INDEXCF) added 0.5 percent to 1,368.14 by 1:12 p.m. in Moscow. Novatek jumped as much as 2.6 percent and traded 1.8 percent higher at 325.64 rubles. The number of shares traded was about 60 percent of the three-month average, data compiled by Bloomberg show. OAO Rosneft, the nation’s biggest oil producer, gained 1.9 percent to 216.47 rubles.
Russian shares tumbled to the lowest since April 23 yesterday amid a retreat in emerging-market shares on wagers the U.S. will scale back stimulus. Novatek extended its share buyback program to June 7, 2014, according to a statement today. The company, which has a 4 percent weighting in the Micex, approved a one-year buyback of as much as $600 million of common shares and global depositary receipts on June 7, 2012.
“Support for Novatek’s stock will last longer now,” Alexei Kokin, an analyst at UralSib Capital, said by phone from Moscow. “According to our estimates, Novatek has spent about 10 percent of the planned amount on its buyback so far.”
Crude, Russia’s main export earner, declined 0.7 percent to $92.45 a barrel in New York, falling for the second day. Russia’s economy grew at the weakest pace since 2009 in the first quarter as the euro area’s longest recession hurt demand for commodity exports, federal data showed on May 17. Russia’s central bank kept its main interest rates on hold for an eighth month in May.
“In June, we’re hoping to see a turnaround in appetite for Russian equities,” Slava Smolyaninov, a Moscow-based analyst at UralSib Capital, said by phone today. “The central bank may cut rates and the situation in Europe may improve.”
The Micex tumbled the most in a year on May 23, the day after U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce the pace of its asset purchases if officials see signs of sustained improvement in growth. The Fed buys $85 billion of Treasury and mortgage debt a month to support the economy by putting downward pressure on interest rates.
The volume of shares traded on the Micex was 28 percent above the 30-day average, while 10-day price swings subsided to 29.956.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.1 times its 12-month estimated earnings and has lost 7.2 percent this year, compared with a 10.3 multiple for the MSCI Emerging Markets Index, which has dropped 3.6 percent in the period.
The dollar-denominated RTS Index (RTSI$) was little changed at 1,360.56. The Russian Volatility Index fell 0.6 percent to 25.02. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. declined 1.9 percent to 89.67 yesterday.
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