Russia’s RTS Surges More Than 20% From Year Low on Fed Surprise
Russian stocks jumped, with the RTS Index rising more than 20 percent from its low this year, after the Federal Reserve refrained from reducing monetary stimulus, easing concern inflows to emerging markets will be cut.
The dollar-denominated RTS added 4.1 percent to 1,487.97 by 11:37 a.m. in Moscow, the third-biggest rally among 94 global indexes tracked by Bloomberg and a 21 percent increase from a 2013 low in June. The Micex Index (INDEXCF) climbed 1.8 percent to 1,491.91, set for the strongest close since March 15. OAO Sberbank, the nation’s largest lender, rose 3 percent to 102.64 rubles, the highest level on an intraday basis since May 29.
The U.S. Federal Open Market Committee said yesterday after a two-day meeting that it wants to see more more evidence that economic progress will be sustained before adjusting the pace of 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 dial down 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 0.7 percent to 31.6025 against the dollar in the 10th day of gains, poised for the longest winning streak on record. VTB Group, the nation’s second-biggest lender, added 1.2 percent to 4.431 kopeks in Moscow and 3.3 percent to $2.8 in London. Sberbank, which accounted for about 45 percent of retail deposits in Russia as of April 1, soared 5.9 percent to $13.01 in London.
The Micex’s 14-day Relative Strength Index rose to 73.17 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, added 0.5 percent to $108.63 in New York, gaining for the second day. The country receives about 50 percent of budget revenue from oil and natural gas sales. Standard & Poor’s GSCI Commodities Index (SPGSCI) advanced 0.8 percent.
Most metals rose in London. OAO Mechel (MTLR), Russia’s biggest coking coal producer, jumped 3.7 percent to 115 rubles. OAO Gazprom, the nation’s biggest natural gas producer, surged 3.3 percent to 149.05 rubles in the nation’s capital and rallied 5.3 percent to $9.42 in London.
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 volume at about 247 percent above the 30-day average, data compiled by Bloomberg show. Ten-day price swings jumped to 18.
The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York gained 2.9 percent yesterday, while Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, advanced 4.1 percent.
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