Russia Equities Rise 2nd Day as Metal Stocks Gain on Yellen Bets

Russian stocks gained for a second day as commodity producers rallied on bets the Federal Reserve’s next chairman will continue stimulus efforts, spurring appetite for riskier assets.

The Micex Index (INDEXCF) added 0.6 percent to 1,499.48 by 12:10 p.m. in Moscow, set for a 0.7 percent advance in the week. OAO Mechel, the nation’s biggest coking coal producer, climbed 2.7 percent to 65.30 rubles, paring a 35 percent slump this week. OAO Magnitogorsk Iron & Steel increased 1.7 percent to 7.842 rubles.

Janet Yellen signaled her determination to use bond buying to strengthen the economy during her confirmation hearing yesterday to be the next Fed chairman. Emerging-market stocks headed for the biggest weekly gain in a month. Crude oil, Russia’s main export earner, rose 0.3 percent to $94.04 a barrel in New York.

“The market is responding to the idea that Yellen will continue stimulus measures,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd. in Moscow, said by phone.

The Federal Open Market Committee will probably wait to taper its bond buying to $70 billion at its March 18-19 meeting from current pace of $85 billion a month, according to the median estimate of 32 economists in a Bloomberg survey Nov. 8.

Mechel (MTLR), which is seeking to obtain a waiver from debt covenants, tumbled as much as 47 percent on Nov. 13. The Moscow-based company is the worst performer on the benchmark gauge this year, with a drop of 68 percent.

‘Purely Speculative’

“Investors sold off Mechel this week out of fear that they won’t be able to repay their debts, but apparently the situation isn’t all that grim,” Vashevnik said.

The Russian company, whose net debt was $9.55 billion as of June 1, has as much as $2.48 billion due next year, according to a June presentation on its website. The Nov. 13 sell-off was “purely speculative” and covenant talks are on schedule to be completed by the end of the month, Mechel spokesman Arseny Palagin said by phone.

The RTS Index (RTSI$) increased 0.9 percent to 1,446.66. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.3 times projected 12-month earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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