Polyus Gold International Ltd. led gains in Russian equities, sending the benchmark index to its first monthly increase since February, as commodities rose after Europe agreed on measures to solve the region’s crisis.
The Bloomberg Russia-US Equity Index of the most-traded Russian companies in New York advanced 3.9 percent to 88.63 on June 29, extending its increase to 9.5 percent last month. Polyus Gold, Russia’s largest producer of the metal, led gains with a 29 percent advance in June, following its listing on the London Stock Exchange. Oil producers OAO Surgutneftegas and OAO Gazprom Neft surged more than 14 percent. The RTS stock-index futures rose 0.5 percent on June 29.
The Thomson Reuters/Jefferies CRB Index of raw materials jumped the most since October as wheat posted the biggest monthly gain since July 2010 and nickel surged 3.1 percent in June. European leaders agreed on June 29 to ease conditions on emergency loans for Spanish banks and take steps to recapitalizing lenders with bailout funds. Europe is Russia’s biggest trade partner and the nations is the world’s third-biggest exporter of wheat and the largest producer of nickel.
“Commodities prices are extremely important for Russia and have a direct impact on Russian markets,” Andrei Bogdanov, who helps to manage $8 billion in Russian equities and bonds at OAO Gazprombank, said in a telephone interview from Moscow on June 29. “There are signs of hope from Europe. Although people are still very cautious, some appetite for the Russian risk is beginning to return.”
The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, jumped 5.5 percent to $26.16 on July 29, the biggest daily gain since Nov. 30. The fund rose 9.3 percent in June, the biggest monthly advance since January. The RTS Volatility Index, which measures expected swings in the index futures, fell 12 percent to 33.25.
‘World Will End’
Russia’s Micex gained 3.3 percent to 1,387.52 on June 29, rising 6.3 percent in the month, the biggest such climb since January. The Russian equity gauge trades at 5.1 times analysts’ earnings estimates for member companies, a 47 percent discount compared with 9.7 for Brazil’s Bovespa index, which lost 0.3 percent in June. The Shanghai Composite Index trades at 9.7 times estimated earnings and the BSE India Sensitive Index has a ratio of 13.7.
“If you don’t think that the world will end tomorrow, then Russian equity valuations are phenomenally low,” Ivan Mazalov, who helps manage about $4 billion in assets at Prosperity Capital Management, said by phone from Moscow on June 29. “It just cannot last, because the global economy is improving.”
‘Dominated by Uncertainties’
The Bloomberg Russia-US Index fell 17 percent in the April-June period, dropping for the first time in three quarters. The measure is down 2.1 percent in 2012. OAO RusHydro, Russia’s largest hydropower company, tumbled 37 percent, leading decliners.
“For most of the quarter the market was dominated by uncertainties about the global economy, particularly, issues in Europe,” Ilya Kravets, research analyst at ED Capital in New York, said by phone on June 29. “Oil fell as a result of that. A decline in oil is bad for Russia, it hurts the ruble and it hurts Russian stocks.”
Surgutneftegas, Russia’s fourth-largest oil producer after OAO Rosneft, OAO Lukoil and BP Plc’s Russian subsidiary TNK-BP, rose 3.8 percent to $5.70 on June 29. The ADRs advanced 14 percent in June, the biggest monthly gain since January. In Moscow, the stock climbed 5.1 percent, rising to 18.646 rubles, or 57.5 U.S. cents. One ADR equals 10 common shares.
Gazprom Neft, the oil arm of Russia’s natural gas export monopoly, added 4.2 percent on June 29 to $22.92, the highest level since May 3. The ADRs rose 14 percent this month. The stock advanced 1.3 percent to 147.85 rubles, or $4.56, in Moscow. One ADR is equal to five common shares.
Brent oil for August settlement surged 7 percent to $97.80 a barrel on the London-based ICE Futures Europe exchange on June 29, gaining by the most since April 2009. Brent crude is the grade that underpins prices for Russia’s major export blend Urals. North Sea Brent is also the benchmark for more than half of the world’s oil. Urals crude advanced 6.6 percent on June 29, also the most since April 2009.
“Oil prices are key for the market in Russia,” Ivan Mazalov, who helps manage about $4 billion in assets at Prosperity Capital Management, said by phone from Moscow. “The news out of Europe are very important for all the markets and particularly for Russia.”
Crude oil for August delivery soared 9.4 percent to $84.96 a barrel on the New York Mercantile Exchange on June 29, the most since March 2009. Prices have fallen 14 percent this year and have dropped 18 percent this quarter.
Polyus, Gold Gain
Polyus’s ADRs rose 1.3 percent to $3.18 in New York, the highest since March 14. The miner said on June 8 that its shareholders approved a plan for a primary listing of shares on the London Stock Exchange.
Gold climbed 2.6 percent in June, rising for the first time in five months. Gold futures for August delivery advanced 3.5 percent to settle at $1,604.20 on the Comex in New York on June 29, the biggest gain since June 1.
Sixteen analysts surveyed by Bloomberg said they expect a gold rally this week and 10 were bearish. Another five were neutral. Investors added almost $2 billion to holdings in gold-backed exchange-traded products last month, the most since November, according to data compiled by Bloomberg.