July 12 (Bloomberg) -- Russian stocks surged to the highest level in seven weeks, led by OAO Gazprom, as oil climbed and comments from Federal Reserve Chairman Ben S. Bernanke eased concern stimulus reduction may be imminent.
The benchmark Micex Index surged 2.2 percent to 1,398.22 by the close in Moscow, the highest since May 22 and bringing the advance this week to 4.1 percent. That’s the steepest gain since December 2011. The dollar-denominated RTS Index rose 2 percent to 1,348.81 and crude oil, Russia’s chief export earner, headed for a third weekly increase. Gazprom, the nation’s biggest company, climbed to the highest since May.
Bernanke said July 10 that the world’s biggest economy will continue to need stimulus, triggering a rally in emerging-market stocks. Minutes of the Fed’s June meeting showed officials want to see more signs of job growth before scaling back $85 billion-a-month in bond purchases. Bank Rossii left its main rates unchanged at Elvira Nabiullina’s first policy meeting as chairman, matching estimates.
“The main reason for today’s optimism is Bernanke’s comments, especially since our market had been oversold,” said Kirill Bagachenko, who manages about $3 billion in Russian equities at TKB BNP Paribas Investment Partners in St. Petersburg. “The oil price is at a high level; investors are primarily buying stocks with large weightings in the index.”
The 50-member Micex’s 5.2 percent decline in 2013 compares with a 2.7 percent increase for India’s benchmark Sensex Index and a gain of 7.5 percent for Hungary’s Budapest Stock Exchange Index. The Micex slid 2 percent on June 20 after comments by Bernanke that signaled the central bank may wind down its bond buying if the U.S. economy performs in line with projections.
Russia’s economy grew 1.6 percent in the first three months, spurring calls for easing. Bank Rossii’s Nabiullina is continuing a course set by predecessor Sergey Ignatiev, who eased policy by lowering longer-term rates while keeping the refinancing rate unchanged since September 2012.
“The market is expecting a rate cut in the near future but expectations for today’s meeting were low,” Bagachenko said.
Bank Rossii introduced a one-year floating-rate facility with a starting cost of 5.75 percent, compared with its 7.5 percent fixed-rate similar maturity loans.
OAO Sberbank, Russia’s biggest lender, rose 3.3 percent to 98.54 rubles, the highest since June 7. The stock increased 3.2 percent to $12.10 in London. VTB Group, Russia’s second-biggest lender, added 0.1 percent to 4.70 kopeks.
Gazprom, which has the largest weighting on the Micex at 15 percent, climbed 3 percent to $7.40 in London. The shares added 3.6 percent to 121.53 rubles in Moscow, the highest since May 31. OAO Rosneft, Russia’s biggest oil producer, advanced 2.6 percent to 246.55 rubles, the highest since March 13. GDRs rose 2.1 percent to $7.515 in London.
OAO Pharmstandard, Russia’s biggest drugmaker, reversed a decline of as much as 7.3 percent, closing 6.7 percent higher at 1,571.70 rubles, the biggest rally on the Micex on a percentage basis. The shares had lost 34 percent in Moscow since a July 8 shakeup in which the company said it offered $630 million for Bever Pharmaceutical Pte Ltd., without disclosing why, and announced the spin off of its own branded, non-prescription drugs business.
The drugmaker purchased an additional 800 million rubles of stock as of yesterday, raising its buyback amount since February to 6.1 billion rubles, the company said in a statement. Unit OAO Pharmstandard-Leksredstva boosted its stake in the company to 16 percent from 11 percent, according to the statement. Pharmstandard said yesterday its acquisition of Bever may include shares of the company held by the unit.
The company will offer to buy out shareholders who vote against the planned spinoff of its over-the-counter unit for 2,180 rubles a share, equivalent to $16.50 per GDR. The GDRs were trading at a 20 percent premium before the plan was announced. The stock gained 6.8 percent in London today after earlier tumbling as much as 5.8 percent.
Brent oil advanced 0.7 percent to $108.52 a barrel in London. Crude climbed as much as 0.9 percent to $105.87 in New York, on course for its longest run of weekly gains since May. The commodity is forecast to rise next week in a Bloomberg News survey on speculation U.S. stimulus measures will continue.
Global growth will reach 3.1 percent in 2013, less than the 3.3 percent forecast in April, the International Monetary Fund said this week. The Micex climbed to a five-week high on July 4 as European Central Bank President Mario Draghi pledged to keep interest rates low. Europe is Russia’s biggest trade partner.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The volume of shares traded on the benchmark today was 47 percent above the 30-day average, according to data compiled by Bloomberg. Forty stocks increased, while 10 declined, the data show.
The 14-day relative strength index on the Micex rose to 64 from 59 yesterday. The RSI measures how rapidly prices have advanced or dropped during a specified time period. Readings below 30 indicate a security may be poised to rise, while those above 70 signal a potential drop.
The Russian Volatility Index, which measures expected swings in RTS futures, tumbled 2.6 percent. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. added 0.8 percent to 89.76.
The Micex trades at 5.3 times its 12-month estimated earnings, compared with a multiple of 9.9 for the MSCI Emerging Markets Index.
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