Moscow Traders’ Windfall Vanishing as Volumes Sink 38%

If the conflict between Russia and Ukraine was a boon for Moscow stock traders, the winding down of the confrontation has been a bust.

The average daily volume of stocks, mutual-fund shares and Russian depositary receipts fell 5.3 percent in May from April to 41 billion rubles ($1.2 billion), after a 34 percent drop the prior month, according to OAO Moscow Exchange. The bourse’s shares slid 3.4 percent to 63.20 rubles in Moscow yesterday. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. gained 0.9 percent to a three-month high.

Trading activity has slowed 38 percent since the end of March as Russia’s signals that it will work with Ukrainian President-elect Petro Poroshenko ease concern that the country will face more international sanctions. Volume almost doubled during the conflict, surging to an average daily level of 66 billion rubles in March, when President Vladimir Putin annexed Crimea. The Micex Index posted its first monthly gain this year in May, while the RTS Volatility Index declined 36 percent.

“Volumes fell to rather normal levels as geopolitical tensions cooled,” Mikhail Shlemov, an analyst at UBS AG in Moscow, said by phone yesterday. “Ukraine elected a new president and Russia declared it’s ready to work with him. Geopolitical risks, including risks of further sanctions against Russia, have eased and there seems to be a status quo in Russia’s relations with the West.”

Photographer: Dan Kitwood/Getty Images

Ukrainian President-elect Petro Poroshenko. Close

Ukrainian President-elect Petro Poroshenko.

Photographer: Dan Kitwood/Getty Images

Ukrainian President-elect Petro Poroshenko.

The total turnover in equities, mutual fund shares and Russian depositary receipts was 824 billion rubles in May, down from 1.3 trillion rubles in March, according to the exchange’s data.

Sanctions Pinch

The U.S. and European Union have imposed sanctions including travel bans and asset freezes on Putin allies in Russia and Ukraine to punish the country for its standoff with the former Soviet Republic. Russia’s $2 trillion gross domestic product grew 0.9 percent in the first quarter from the same period of 2013, the slowest pace in a year, the Federal State Statistics Service said on May 15.

“Further Russian provocation will be met with further cost for Russia,” U.S. President Barack Obama said at a news conference in Warsaw yesterday. He is scheduled to meet with Poroshenko today. Obama’s European tour comes as Ukraine said yesterday it was deploying heavy weapons and armored vehicles to strengthen the border with Russia and halt an influx of fighters into its eastern regions.

The turmoil in Ukraine made the start of 2014 a busy, and potentially profitable, time for Russian stockbrokers. Trading in equities almost doubled on average at 50 Russian brokerages in March from February, Moscow Exchange data show.

Volume Push

The average daily volume of equities trading was 37 billion rubles in November, as street protests demanding pro-Russian president Viktor Yanukovych’s resignation and closer ties with the European Union marked the beginning of the crisis.

The Micex’s three-month historical volatility reached 29.7 percent on May 30, almost three times the level of the MSCI Emerging Markets Index and up from 12.7 percent at the end of February, according to data compiled by Bloomberg.

The exchange transitioned last September from a rule that had required an immediate settlement of trades, and the country’s stocks are set to become available through Euroclear Bank SA in July as part of a restructuring intended to increase volume. Yandex NV, the nation’s largest search-engine operator, added a Moscow listing and began trading in Russia today as part of a government campaign to reduce dependence on overseas exchanges.

‘More Accessible’

Shlemov at UBS rates Moscow Exchange a buy, with a price target of 74 rubles. “If there are no new sanctions and the current status quo in Russia’s relations with the West is unchanged, more investors are going to pay attention to the incredible cheapness of Russian equities, while the exchange makes them more accessible for foreign investors,” he said yesterday.

Yandex gained 2.3 percent to $32.40 in New York yesterday. The Micex index rose 0.1 percent to 1,474.47 at 9:36 a.m. in New York today, the highest since Feb. 25. The gauge’s 14-day relative strength index climbed to 67.8, approaching the level of 70 that some technical analysts see as an indication a security is poised to fall. The benchmark trades at 5.3 times estimated 12-month earnings, compared with a multiple of 15.3 for India’s S&P BSE Sensex Index and 10.2 for Brazil’s Ibovespa.

The Market Vectors Russia ETF (RSX) was unchanged today after rising 1.1 percent to $25.60 yesterday. The RTS Volatility Index, which measures expected swings in futures, slipped 0.2 percent to 25.73.

To contact the reporters on this story: Halia Pavliva in New York at; Ksenia Galouchko in Moscow at

To contact the editors responsible for this story: Nikolaj Gammeltoft at; Wojciech Moskwa at Richard Richtmyer, Matthew Oakley

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