Russian stocks climbed for a third day as investors awaited signs on economic stimulus from the U.S. Federal Reserve and OAO Mechel, Russia’s biggest coking coal producer, surged on a buyback announcement.
The Micex Index, the country’s benchmark equities gauge, added 0.7 percent to 1,335.14 by the close in Moscow. Russia’s stocks have the cheapest valuations among 21 emerging markets tracked by Bloomberg.
Fed Chairman Ben S. Bernanke holds a press conference tomorrow after a two-day policy meeting. Mechel rose as much as 10 percent, climbing 7.7 percent to 98.10 rubles after announcing it plans to buy back as much as $100 million in American depositary receipts. The ADRs rose as much as 14 percent in New York, before trading up 9.9 percent at $3.12. The receipts have slumped 55 percent this year, while the local shares have dropped 52 percent.
“Since Mechel has lost so much of its stock value, this is very good news for investors,” Airat Khalikov, an analyst at Veles Capital, said by phone. “While the stock has been falling on concern about its large debt, this is a strategic company and the state won’t let it fail.”
Mechel leads losses among Russian companies traded in the U.S. this year as declining output dims the outlook for earnings after its ratio of net debt to equity, a measure of leverage, soared to 2.7 at the end of 2012, an unprecedented level for the company, according to data compiled by Bloomberg. Mechel’s preferred shares increased 3.1 percent to 55.35 rubles in Moscow.
The dollar-denominated RTS Index, which entered a bear market on June 5, closed little changed at 1,314.06. Consumer goods stocks were the biggest gainers among nine industry groups on the Micex, adding 2.5 percent on average.
The 14-day relative strength index on the Micex advanced to 46 after falling to 31.4 last week, the closest since April to a level of 30, which signals a rebound to some analysts. On the Micex, 37 stocks increased and 13 dropped. The volume of shares traded on the gauge was 32 percent below the 30-day average, while 10-day price swings rose for a fourth day to 26.40.
“The main question is what the Fed will say, before that investors will refrain from making any bold moves,” Vladimir Bragin, head of research at Alfa Capital in Moscow, where he helps manage $2.9 billion, said by phone. “Russia will be closely watching the commodities prices as we remain highly reliant on them.”
Crude oil, Russia’s chief export earner, added 0.3 percent to $98.09 by the close of stocks trading in Moscow, as the Syrian conflict bolstered concern that the flow of supplies from the Middle East may be disrupted. Brent for August settlement increased 0.4 percent to $105.88 a barrel on the London-based ICE Futures Europe exchange.
Russia’s economy grew 1.6 percent in the first three months, decelerating for a fifth quarter and missing the medium-term target of 5 percent set by Prime Minister Dmitry Medvedev, the slowest pace since 2009.
The International Monetary Fund today cut its growth forecast for Russia to 2.5 percent this year and 3.25 percent in 2014, compared with April predictions of 3.4 percent and 3.8 percent, respectively. The Washington-based lender cautioned the country against the danger of stoking inflation with fiscal stimulus, urging policy makers to improve the business climate.
Bank Rossii held its refinancing rate at 8.25 percent on June 10. That matched the median estimate in a Bloomberg survey of 26 economists, with four predicting a quarter percentage point cut. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months.
Out of 50 stocks on the Micex, two closed yesterday at 52-week lows and three at highs, according to data compiled by Bloomberg. Eighteen stocks, or 36 percent, were trading above their 50-day moving average.
OAO Rostelecom climbed 1.6 percent to 97.41 rubles as Sberbank CIB lifted the stock to buy, citing its drop this year in an e-mailed note. The shares have lost 19 percent in Moscow this year.
The Micex trades at 5 times its 12-month estimated earnings, having lost 9.5 percent this year, compared with a multiple of 9.8 for the MSCI Emerging Markets Index, which is down 9.7 percent.
The Russian Volatility Index slid 0.7 percent to 27.62. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. increased 0.9 percent to 86.84.