Russian stocks climbed for a second day, the most among developing markets, as UBS AG (UBS) named the country its preferred emerging equity market in the region on valuations and economic potential.
The Micex Index (INDEXCF), Russia’s benchmark index, added 2 percent to 1,325.27 by the close in Moscow, after losing 3.3 percent last week, the fifth week of declines. The country’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. While Russia’s economy grew 1.6 percent in the first quarter, the slowest pace since 2009, UBS forecasts growth will pick up in the second half of 2013, according to today’s e-mailed note.
Stocks also rose as crude oil, Russia’s chief export earner, advanced 0.3 percent to $98.14 a barrel in New York today on renewed speculation that unrest in Syria will spread to other parts of the Middle East and disrupt supplies. The U.S. Federal Open Market Committee meets this week, and may provide clues on when policy makers will begin curtailing quantitative easing.
“There’s more optimism in the market today,” Slava Smolyaninov, deputy head of research at UralSib Capital, said by phone from Moscow. “Commodities are trading higher. Investors are waiting for the results of the Fed meeting and won’t be making any radical moves until then.”
The 14-day relative strength index on the Micex advanced to 43.6 after falling to 31.4 last week, the closest since April to a level of 30, which signals a rebound to some analysts. On the Micex, 46 stocks increased and 4 dropped. The volume of shares traded on the gauge was 15 percent below the 30-day average, while 10-day price swings rose for a third day to 26.08, the highest since June 3.
“Russia is our preferred market in the region,” UBS strategist John Orford, said in an e-mailed note. “It’s relatively cheap, the economy should grow faster in the second half, and it’s less exposed to higher U.S. real rates than Turkey and South Africa.”
Polymetal International Plc (POLY) listed shares on the Moscow Exchange today, with trading expected to begin on June 20, according to a statement from the exchange. The company, along with Evraz Plc, will be excluded from FTSE 100 Index effective June 24. The London-traded stock gained 0.5 percent to 652.50 pence today.
Bank Rossii held its refinancing rate at 8.25 percent on June 10. That matched the median estimate in a Bloomberg survey of 26 economists, with four predicting a quarter percentage point cut. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months.
OAO Novatek, the nation’s second-biggest natural-gas producer, jumped 5.4 percent to 332.20 rubles, rising for a second day and to the highest level since Feb. 13. Bank of America Corp. Merill Lynch raised the stock to buy, citing liquefied natural gas liberalization in Russia and entry of a second partner into its Yamal LNG project.
Reuters reported on June 13 that China Petroleum and Chemical Corp., known as Sinopec, may sign an agreement this week to join a $20 billion LNG project run by Novatek in Yamal, citing unidentified people in Moscow. Novatek’s GDRs rose 4.5 percent to $115 in London.
OAO Tatneft gained 6.4 percent to 184.84 rubles, the biggest advancer on the Micex and the highest since May 30. UBS lifted the oil producer’s stock to buy on valuation today as the stock has lost 15 percent this year. Its GDRs surged 6.6 percent to $35.26. OAO Lukoil, which has the biggest weighting on the Micex at 16 percent, added 1 percent to 1,879.40 rubles.
The Micex trades at 4.9 times its 12-month estimated earnings, having lost 10 percent this year, compared with a multiple of 9.9 for the MSCI Emerging Markets Index, which is down 9.2 percent.
The Russian Volatility Index tumbled 9 percent to 27.81. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. increased 1.2 percent to 86.54 today.
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