Russian stocks rose on bets the government will push ahead with asset sales and boost dividends at the country’s biggest companies.
The benchmark Micex Index added 0.6 percent to 1,422.58 by the close in Moscow, after falling as much as 0.9 percent earlier. OAO RusHydro surged 4 percent after President Vladimir Putin said the state won’t sell its stake at the current market valuation. Preferred shares of OAO Sberbank, the nation’s biggest lender, rose 2.9 percent.
Russia is committed to selling state assets and energy companies should consider increasing dividend payments to increase their market value, Putin said at a meeting with executives and government officials today. Emerging-market stocks rose for the first time in five days as European leaders moved to strengthen Spanish banks, easing concern the region’s debt crisis will hit economic growth.
Putin’s comment “reaffirms the government’s commitment to upgrading corporate governance at state-owned companies and improving the Russian investment climate, of which increasing dividends is a major feature,” Bruce Bower, a partner at Moscow-based hedge fund Verno, which manages more than $200 million in Russian equities, said by e-mail. “His comments about Rushydro being undervalued remove the near-term risk of stock overhang.”
RusHydro, the country’s biggest hydropower producer, closed at 86.07 kopeks after the biggest gain since June 7.
“There’s been a lot of progress in Europe for the last few weeks, the Spanish banks’ bailout today shows that European leaders are stepping up their efforts,” Bower said by phone earlier today.
Thirty billion euros ($37 billion) will be lent by the end of July with the goal of eventually using the euro-area bailout fund to recapitalize banks directly instead of saddling the Spanish government with the debts, Luxembourg Prime Minister Jean-Claude Juncker said.
Crude oil slumped 1.2 percent to $84.93 in New York after rising as much as 2.4 percent yesterday. Oil and gas contribute about 50 percent of Russia’s state revenue.
Investors should buy European stocks with sales in Russia because economic growth in the world’s biggest energy exporter will outperform the debt-stricken euro region, according to Citigroup Inc.
“The point is that Russia has growth while Europe is facing stagnation,” Kingsmill Bond, chief strategist at Citigroup in Moscow, said in a phone interview today. “A lot of the growth that European companies will generate will be from their Russian operations.”
Russia’s benchmark index, which has added 2.2 percent this year, trades at 5.2 times estimated earnings. That compares with 9.6 times projected earnings for MSCI’s emerging-market gauge, which has gained 2.2 percent this year.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg, reflecting concern the country is too reliant on energy exports.