Russia Stocks Cap Best Week in Two Months on Oil, Utility Rally

Russian stocks rose, capping the biggest weekly gain in two months, as crude oil climbed and utilities rallied on President Vladimir Putin’s decrees to merge and inject cash into companies in the industry.

The Micex Index increased 0.7 percent to 1,413.15 by the close in Moscow, a 2.1 percent gain in the week and the biggest advance for the period in two months. OAO MRSK Holding, the nation’s largest power distributor, surged 6.1 percent, the biggest advance since September, as 1.9 times the three-month daily average number of shares changed hands. OAO Inter RAO UES increased 4.4 percent.

Putin signed a decree giving MRSK Holding a majority stake in Federal Grid Co., the country’s monopoly for high-voltage power transmission. He also approved a cash injection for OAO RusHydro, the country’s biggest renewable energy producer. The MSCI Russia Utilities Index has climbed 9.8 percent this week, the most since the period ending Sept. 14.

“This is definitely a good week for utilities, the government’s decrees bring an end to uncertainty,” Ivan Manaenko, head of research at Veles Capital LLC in Moscow, said by phone. “The oil rally this week caused by the conflict in the Middle East helped boost appetite for Russia.”

The dollar-denominated RTS Index gained 0.9 percent to 1,432.24, the highest level since Nov. 2.

Crude Oil

Crude, Russia’s main export earner, increased 0.3 percent to $87.67, adding 1.2 percent in the week. A cease-fire between Israel and Hamas crafted by Egypt and the U.S. halted eight days of aerial assaults that ravaged the Gaza Strip and made Tel Aviv a missile target. Russia receives about half of its budget revenue from oil and natural gas sales.

A report showing German business confidence unexpectedly rose from the lowest level in 2 1/2 years in November bolstered sentiment that Europe’s largest economy may regain some strength.

Federal Grid climbed 7.2 percent, with trading volume at 2.3 times the three-month daily average. The power transmission company rose 10 percent in the week, the biggest advance on the Micex. RusHydro added 1.3 percent today after rising 3.8 percent yesterday as Putin approved a 50 billion-ruble ($1.6 billion) cash injection into the company this year.

AFK Sistema gained 7.5 percent this week, the second-biggest advancer. The holding company was granted permission to trade 25 percent of its stock overseas, according to an e-mailed statement from the Federal Financial Markets Service late yesterday.

Fund Outflows

Russian equity funds had $101 million of outflows in the five trading days ended Nov. 21, a seventh week of redemptions and up from $48 million of outflows a week earlier, according to Sberbank CIB’s note, which cited EPFR Global data.

OAO Rosneft fell 0.7 percent to 241.55 rubles, the lowest since Nov. 8. BP Plc, Europe’s second-biggest oil company, signed a binding agreement to sell its half of the TNK-BP Russian oil venture to Russia’s largest oil producer, according to yesterday’s statement from BP. Rosneft declined 2.7 percent this week, leading declines this week in the Micex.

The Micex trades at 5.3 times estimated earnings, the lowest valuation among 21 emerging markets tracked by Bloomberg. That compares with a multiple of 10 times for the MSCI Emerging Markets Index. Russia’s benchmark gauge has advanced 0.8 percent this year, compared with an 8.5 percent gain for the global index for developing markets.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE