Russian equities rallied, trimming their third monthly drop, as VTB Group rose for a second day and Federal Grid Co. surged after UBS AG lifted the stock to buy.
The Micex Index gained 1.7 percent to 1,385.88 by 6:45 p.m. in Moscow, paring its monthly decline to 3.7 percent. VTB, the country’s second-biggest lender, added 4.5 percent to 4.92 kopeks, while Federal Grid, Russia’s power transmission monopoly, jumped 9.6 percent to 12.04 kopeks.
Investors agreed to buy all $3.3 billion of stock VTB is selling to increase capital, the lender said yesterday. UBS changed its recommendation on Federal Grid’s shares from neutral after their fall amid investor concern about the company’s merger with OAO Russian Grids. Federal Grid and Russian Grids, formerly known as MRSK Holding, are among the worst performers this month on the Micex, losing at least 24 percent.
“Power companies have been the worst decliners this month, so investors may be buying them in hopes the market will turn around next month,” Dmitry Mikhailov, who manages $130 million in assets at Renaissance Capital in Moscow, said by phone.
The Russian stock market will be closed May 1 and May 9 for public holidays, according to the Moscow Exchange website.
VTB has orders from new and existing shareholders, including Norges Bank Investment Management, the world’s largest sovereign fund, Qatar Holding LLC and Azerbaijan’s State Oil Fund, Moscow-based VTB said yesterday in a statement. The three sovereign funds took more than 50 percent of the offering, Chief Financial Officer Herbert Moos said on a conference call.
“This is an actual short covering,” Joseph Dayan, head of markets at BCS Financial Group in London, said by e-mail. “The bank executed the capital raising perfectly. They really nailed it.”
OAO Surgutneftegas ordinary shares tumbled 4.5 percent to 26.681 rubles, the steepest drop on the Micex. The third-largest Russian oil producer reported its first international results in more than a decade, confirming its $29.7 billion cash pile, while showing only a small treasury stake on its balance sheet and failing to disclose beneficial owners. The company’s preferred shares rose 0.6 percent to 21.835 rubles.
“This could have been a turning point for Surgut, but they missed the opportunity,” Dayan from BCS said. “They had over a decade to prepare for today. For them not to have a straight answer on where the treasury shares are is just mind-boggling.”
Shares of OAO Magnit, Russia’s largest food retailer, surged 5 percent to a record 6,625.70 rubles. The stock extended its monthly gain to 12 percent, the best result for the period.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.3 times 12-month estimated earnings and has lost 6 percent this year, compared with a 10.8 multiple for the MSCI Emerging Markets Index, which has dropped 1.8 percent in the period.
The country’s economic growth is forecast to slow to 2.4 percent this year on high interest rates and lower gas exports, Economy Minister Andrei Belousov told reporters on April 11. Russia’s economy grew 2.1 percent from a year earlier in the fourth quarter, down from 3 percent in the previous three months and less than Prime Minister Dmitry Medvedev’s 5 percent medium-term target.
The dollar-denominated RTS Index rose 1.4 percent to 1,407.21. The RTS Volatility Index, which measures expected swings in stock futures, rose 0.2 percent to 20.79.