Micex Extends 2013 Gains as Investors Shrug Off Terror Blasts

Russia’s benchmark stock gauge extended this year’s gains on the last trading day of 2013 as investors bet twin bomb blasts in the country’s south won’t damage the economy.

The Micex Index (INDEXCF) added 0.3 percent to 1,499.62 by 12:34 p.m. in Moscow, taking its increase this year to 1.7 percent. OAO MegaFon, Russia’s second-biggest mobile phone operator, climbed 1.5 percent to 1,109 rubles, heading for a 53 percent increase in the year. Gas producer OAO Novatek rose 1.4 percent to 404.12 rubles, poised for a 17 percent gain in 2013.

The Micex’s advance this year compares with a 5.3 percent drop for the MSCI Emerging Markets Index. Bombings at a train station and on a trolleybus killed at least 26 people within 24 hours in the southern city of Volgograd. The attacks come as Russia prepares to host the Olympics in February in Sochi, a Black Sea resort close to areas of unrest in the North Caucasus.

The Micex “rarely reacts to this kind of terrorist activity,” Julian Rimmer, a trader at London-based CF Global Trading U.K. Ltd., said by e-mail. “They are usually one-off events which don’t impact the economy in the long-term.”

Russia’s gross domestic product expanded 1.2 percent in the third quarter, the slowest pace since a contraction in 2009. The Moscow bourse will shut for four days for New Year holidays starting Dec. 31. The exchange will also close Jan. 7 for Russian Orthodox Christmas.

Equity Outflows

“The biggest question is if and when Russia would be able to accelerate” growth, Slava Smolyaninov, chief strategist at UralSib Financial Corp. in Moscow, said by e-mail. “In terms of trading last week and today, there is no activity whatsoever. Most people are away.”

OAO Mechel and OAO Magnitogorsk Iron & Steel each slumped more than 29 percent this year as the S&P GSCI index of 24 raw-material prices headed for the first annual decline since 2008.

Redemptions from Russia-dedicated equity funds reached $3.59 billion in 2013 through Dec. 18, the most since EPFR Global started tracking flows in 1996, the Boston-based research firm said by e-mail on Dec. 20.

Russian equity funds posted $178 million in outflows in the week ended Dec. 25, Sberbank CIB said in an e-mailed note Dec. 27, citing EPFR data.

Stocks were supported by President Vladimir Putin’s decision to pardon imprisoned former Yukos Oil Co. owner Mikhail Khodorkovsky this month and as two members of the Pussy Riot punk group were also freed.

OAO Magnit, the nation’s biggest food retailer, was poised for an 89 percent gain this year, the best on the Micex. OAO Aeroflot, the nation’s biggest airline, headed for an 87 percent increase in 2013. Aeroflot traded 2.4 percent higher at 84.44 rubles today.

The dollar-denominated RTS Index (RTSI$) fell 0.2 percent to 1,442.21, poised for a 5.6 percent retreat this year. Russian equities have the cheapest valuations among 21 developing-nation economies monitored by Bloomberg, with shares on the benchmark Micex trading at 4.5 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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