Russian stocks jumped, with the RTS Index rising 19.9 percent from its low this year, after the Federal Reserve unexpectedly decided against reducing monetary stimulus, boosting appetite for emerging-market equities.
The dollar-denominated RTS added 3.4 percent to 1,478.75 by the close in Moscow, 0.90 points short of a bull market. The Micex Index (INDEXCF) climbed 1.5 percent to 1,487.19, the strongest close since March 15. OAO Sberbank, the nation’s largest lender, rose 2.8 percent to 102.37 rubles, the highest since May 28. Polymetal International Plc (POLY), a Russian gold and silver miner, surged 7.3 percent to 369.34 rubles as gold increased.
The U.S. Federal Open Market Committee said yesterday that it needs more evidence economic progress will be sustained before paring its $85 billion in monthly purchases of Treasury and mortgage debt. The Micex advanced an average 77 percent during the Fed’s first two rounds of bond buying, and fell 0.6 percent in periods of no stimulus, the biggest difference among 46 emerging and developed markets tracked by Bloomberg.
“The Fed’s decision came as a big surprise,” Vadim Bit-Avragim, who helps manage about $4.4 billion at Kapital Asset Management in Moscow, said by phone. “Emerging markets could’ve suffered significantly from a cut to liquidity.”
While downside risks to the outlook have diminished, “tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement,” the central bank said in Washington. Economists had forecast the FOMC would reduce monthly Treasury purchases by $5 billion, to $40 billion, while maintaining its buying of mortgage-backed securities at $40 billion, according to a Bloomberg News survey.
“This is a very positive signal for Russian bank shares,” Kapital’s Bit-Avragim said. “Banks are the main beneficiaries of this decision now that we’re seeing the ruble rally.”
The ruble increased 0.4 percent to 31.6865 against the dollar, poised for the longest winning streak on record. VTB Group, the nation’s second-biggest lender, added as much as 2.5 percent in Moscow before closing little changed at 4.376 kopeks. Sberbank, which accounted for about 45 percent of retail deposits in Russia as of April 1, soared 4.7 percent to $12.87 in London.
“A tapering was priced in to the market last week so the rally should be sustainable for a few days or maybe weeks,” Tim McCarthy, who helps manage $1 billion of assets at Valartis Asset Management in Geneva, said by phone. “We had 3 percent of our Russian equity exposure in cash in case of redemptions and we’ve put some of that to work today increasing cyclical exposure to metals and mining and financial stocks.”
Most metals rose in London. OAO Mechel (MTLR), Russia’s biggest coking coal producer, jumped 2.1 percent to 113.20 rubles. OAO Severstal, a Russian steelmaker, added 3.1 percent to 304.90 rubles and gained 4.2 percent to $9.565 in London. OAO Gazprom, the nation’s biggest natural gas producer, surged 2.4 percent to 147.81 rubles and rallied 4.5 percent to $9.35 in London.
The Micex’s 14-day Relative Strength Index rose to 71.99 today, above the level of 70, which suggests to some analysts that a security has been overbought and is poised for a decline. It closed at 67.36 yesterday. The RSI measures how rapidly prices have advanced or dropped during a specified time period.
Crude oil, Russia’s main export earner, retreated 0.2 percent to $107.88 in New York, erasing earlier gains of as much as 0.9 percent. The country receives about 50 percent of budget revenue from oil and natural gas sales. Standard & Poor’s GSCI Commodities Index (SPGSCI) advanced 0.3 percent.
The Micex sank 0.7 percent on Sept. 13 as Russia’s central bank kept the refinancing rate unchanged at 8.25 percent, matching the forecast of 14 out of 22 economists in a Bloomberg survey. Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median estimate for 2 percent.
Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg, with shares trading at 4.3 times 12-month estimated earnings, compared with a multiple of 10.8 for the MSCI Emerging Markets Index. Trading volume on the Micex surged today, with the average at about 127 percent above the 30-day average, data compiled by Bloomberg show. Ten-day price swings rose to 17.10.
The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York gained 0.2 percent today, while Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, dropped 1.5 percent.
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