Sberbank Leads Best Russian Weekly ADR Gain in 10 Months

Russian equities surged the most last week in 10 months, led by OAO Sberbank, as President Vladimir Putin’s pledge to withdraw troops from the Ukraine border spurred speculation the crisis may be easing.

The Bloomberg index of the most-traded Russian stocks in the U.S. surged 5.2 percent last week, its biggest advance since July, as American depositary receipts of Sberbank, the country’s biggest lender, jumped 14 percent to a one-month high. OAO Gazprom, the world’s biggest producer of natural gas, posted the biggest weekly gain since December 2011.

With U.S.-listed Russian stocks trading near the lowest valuations since 2009 after a 19 percent plunge this year, investors from Aberdeen Asset Managers Ltd. (ADN) to Skagen AS said they have been buying. Putin on May 7 pledged to pull back troops amassed at the Ukrainian border and urged separatists in Ukraine’s south and east to postpone votes on regional autonomy. Ukrainian Prime Minister Arseniy Yatsenyuk said that a dialogue aimed at preserving national unity would start this week.

“Are the May 7 statements by Putin yet another move in a very complex chess game, or did he really mean no war?” Kirill Mouromtsev, a trader at Natixis in Paris, said by phone on May 9. “So far, the market takes it as his sincere desire to avoid a war and some investors are beginning to buy Russia.”

Photographer: John Moore/Getty Images

Election workers empty a ballot box for counting following a referendum on independence for eastern Ukraine in Slovyansk on May 11, 2014. The government in Kiev and its U.S. and European allies say Putin is fomenting unrest in eastern Ukraine, where separatists in the Donetsk and Luhansk regions held autonomy referendums yesterday. Close

Election workers empty a ballot box for counting following a referendum on independence... Read More

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Photographer: John Moore/Getty Images

Election workers empty a ballot box for counting following a referendum on independence for eastern Ukraine in Slovyansk on May 11, 2014. The government in Kiev and its U.S. and European allies say Putin is fomenting unrest in eastern Ukraine, where separatists in the Donetsk and Luhansk regions held autonomy referendums yesterday.

Autonomy Votes

The Market Vectors Russia ETF (RSX), the biggest U.S. exchange-traded fund that holds Russian stocks, climbed 6.4 percent for the week, the biggest increase since September 2012. Sberbank jumped to $9.36, trimming its 2014 plunge to 26 percent. Gazprom advanced to $7.88. United Co. Rusal (486), a Moscow-based aluminum producer, dropped 1.2 percent to HK$3.44 in Hong Kong trading as of 10:11 a.m. local time.

The government in Kiev and its U.S. and European allies say Putin is fomenting unrest in eastern Ukraine, where separatists in the Donetsk and Luhansk regions held autonomy referendums yesterday. There’s no sign Russia pulled back troops from Ukraine’s border as Putin pledged, NATO Secretary General Anders Fogh Rasmussen said on May 9.

The 28 European Union nations are preparing to impose sanctions on some Russian companies, and a list may be approved as soon as today, two officials from member countries said in Washington on condition they not be named because of the sensitivity of the issue. The companies facing penalties are blamed for the expropriation of businesses in Crimea.

Russian Valuations

Deutsche Bank AG strategist John-Paul Smith predicted a Russian stock market rebound on May 6. The next day, Peter Taylor, who helps oversee about $2 billion in Russian assets from London for Aberdeen, said that he had boosted his investment in OAO Magnit (MGNT) as the country’s largest retailer isn’t exposed even if more sanctions are implemented.

Ole Soeberg, who helps manage about 122 billion kroner ($20.6 billion) at Skagen in Stavanger, Norway, said he bought shares of OAO Moscow Exchange and Sberbank over the last month on attractive valuations.

Equities on the Bloomberg Russia-U.S. gauge trade at 5.7 times estimated earnings, down from a multiple of 7.5 at the end of last year. The Micex Index has a price-to-earnings ratio of about 5, compared with 10.5 for the MSCI Emerging Markets Index.

The Kiev government has launched a military offensive to regain control of parts of the country where pro-Russian activists seized government buildings. A presidential election is scheduled for May 25.

“Russian equities are cheap, but that doesn’t mean it’s time to buy,” Ilya Kravets, the New York-based director of investment research at Daniloff Capital LLC, said by phone on on May 9. “The situation is still unpredictable, while the market seems to think there will be no war and no new sanctions against Russia.”

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net; Marie-France Han at mhan30@bloomberg.net Marie-France Han

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