RTS Futures Rise as Valuations Hit 2-Week Low: Russia Overnight

Russian equity futures rose as valuations on the Micex Index fell to the lowest in two weeks and speculation increased that growth exceeding earlier government forecasts may lead policy makers to keep interest rates on hold.

Futures expiring in September on the dollar-denominated RTS index climbed 1.1 percent to 134,795. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in New York was little changed at 88.95. OAO Gazprom Neft, the oil arm of Russia’s natural gas export monopoly, surged the most in 2012 after VTB Capital added the stock to its list of top picks.

Russian stocks trade at 4.9 times trailing earnings, less than half the multiple for the average emerging-market stocks, after the ruble-denominated Micex slumped to the lowest in July yesterday. Russia, the last major emerging economy to keep borrowing costs unchanged this year, will refrain from cutting rates for a seventh month today after a surge in inflation in June, according to 14 of 15 economists surveyed by Bloomberg. Russia’s economy may expand as much as 4 percent in 2012, more than the government’s previous forecast of 3.4 percent, Economy Minister Andrei Belousov said on June 21.

“Valuations fell to the point where it’s unaffordable not to buy, especially stocks exposed to Russia’s domestic growth story,” Olga Efremova, an analyst at Nomos Bank, said by phone from Moscow yesterday. “Investors refocus on companies that get exposure to the country’s strong macroeconomic story.”

Russia ETF Retreats

The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, retreated 0.7 percent to $25.88, dropping for the fifth time in six days. The RTS Volatility Index, which measures expected swings in the index futures, fell 2.1 percent to 32.80.

Bank Rossii will keep the refinancing rate at 8 percent, a quarter-point above the record low, at a meeting after 10 a.m. in Moscow today, according to a Bloomberg survey of economists. Policy makers will also leave the auction-based repurchase rate, the main tool for offering lenders rubles, at 5.25 percent and the overnight deposit rate at 4 percent, two other surveys showed.

Russia’s international currency and gold reserves total $511.4 billion, the nation’s central bank said in a statement yesterday, making it the world’s fourth-largest after China, Japan and Saudi Arabia.

Russia’s Reserve Fund and National Wellbeing Fund, which collect windfall oil revenue, grew to $60.5 billion and $85.6 billion respectively as of July 1, the Finance Ministry said in a July 2 statement on its official website.

‘Good Investment Opportunity’

Gazprom Neft rose 4.5 percent to $23.82 in New York yesterday, the biggest advance since Dec. 20. The stock was the biggest gainer on the Bloomberg Russia-US Equity Index of Russian shares traded in New York, followed by OAO GMK Norilsk Nickel and OAO Lukoil.

VTB Capital prefers Gazprom Neft, Lukoil and BP Plc’s Russian subsidiary TNK-BP against OAO Surgutneftegas, OAO Tatneft, OAO Bashneft and Alliance Oil, the bank said in an e-mailed note yesterday.

The Russian government derived half of its income from oil and gas last year. That came mainly from Russia’s export duties on crude and products as well as extraction taxes, which are based on prices for Russia’s Ural’s crude export blend.

“The Russian oil sector represents a good investment opportunity, despite investors’ appetite being dented by the perception that revenue-based Russian oil taxation is insufferably heavy,” Dmitry Loukashov, an analyst at VTB, wrote in the note.

Lukoil, Russia’s second-biggest oil producer after OAO Rosneft, gained 0.1 percent to $55.43, the highest level since July 6. Lukoil climbed 0.1 percent to 1,804.30 rubles, or $55.15, in Moscow yesterday.

Oil Gains

Oil for August delivery rose 0.3 percent to $86.08 a barrel on the New York Mercantile Exchange yesterday, after the U.S. announced more sanctions on Iran, the second-biggest crude-producing member of the Organization of Petroleum Exporting Countries. Prices have decreased 13 percent this year.

Brent for August settlement climbed 0.8 percent to $101.07 a barrel on the London-based ICE Futures Europe exchange. Urals crude fell 0.1 percent to $100.00 per barrel yesterday.

The Thomson Reuters/Jefferies CRB Index of raw materials fell 0.2 percent 290.27 while the Standard & Poor’s GSCI Spot Index gained 0.4 percent to 614.91.

The ruble has depreciated 12.1 percent against the dollar since the end of April, the most among 25 emerging-market currencies tracked by Bloomberg. The ruble ended the session 0.2 percent lower at 32.78 in Moscow. The currency may fall to 33.282 in three months, according to non-deliverable forwards.

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