Russian stocks swung between gains and losses as OAO Moscow Exchange rose on bets it will be added to MSCI Inc.’s local index, while the country cut its long-term growth outlook.
The Micex Index (INDEXCF) rose less than 0.1 percent to 1,500.79 by 12:38 p.m. in Moscow, after decreasing 0.3 percent earlier. Moscow Exchange added 1.6 percent to 62 rubles, the biggest advancer on a percentage basis on the gauge. OAO Uralkali, the world’s biggest potash producer, fell 1.7 percent to 168.35 rubles. OAO Severstal climbed 1.2 percent to 286.40 rubles after UBS AG added the steelmaker to its most-preferred stock list.
Moscow Exchange, which sold shares in an initial public offering in February, may be added to the MSCI Russia Index, according to VTB Capital and MidLincoln Research. Russia lowered its economic growth forecast to a 2.5 percent average annual rate through 2030, Economy Minister Alexei Ulyukayev said today. The central bank announces its rates decision tomorrow.
“Considering that we’ll see the economic slowdown lasting until at least 2030, the central bank’s short-term stimulus measures, like a rate cut, won’t make any significant difference,” Vladimir Bragin, head of research at Alfa Capital in Moscow, said by phone.
Russia’s central bank will probably leave borrowing costs unchanged for a 14th month at its meeting tomorrow, according to all 24 economists in a Bloomberg survey. Policy makers have held interest rates for more than a year in a bid to tame inflation. Price growth was probably 6.1 percent this month, the Economy Ministry said in an e-mailed report on Nov. 1. That compares with 6.3 percent in October.
Russian companies’ earnings will suffer from excessive capital expenditure in many industries and from the deterioration in Russia’s structural growth rate, exacerbated by a slowdown in China, Deutsche Bank AG analysts said today in an e-mailed note. Russia remains a “value trap,” they said, reiterating their underweight rating.
President Vladimir Putin is deploying one of the country’s two sovereign wealth funds to prop up the economy, committing up to 40 percent of the National Wellbeing Fund to improve infrastructure. The funds will be allocated to infrastructure projects, including Trans-Siberian railroads and a new ring road around Moscow, First Deputy Prime Minister Igor Shuvalov said yesterday, as the economy grows at the weakest pace since the 2009 contraction.
“Russia is virtually launching its own quantitative-easing program by injecting the economy with cash via infrastructure projects,” Bragin said. “I have doubts that through the infrastructure projects one can finance the economy.”
MSCI announces its index rebalancing results after the market close today. OAO TMK, OAO Inter RAO UES and LSR Group may be removed, according to VTB Capital.
The RTS Index (RTSI$) was little changed at 1,459.34.
Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.2 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index. Ten-day price swings on the Micex fell to 6.019 from 6.217 yesterday.
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