Russian shares had their longest winning streak since December as U.S. Federal Reserve Chairman Ben S. Bernanke said the pace of bond purchases was not on a preset course and OAO Gazprom rallied the most in 21 months.
The benchmark Micex Index rose for a fifth day, adding 1.5 percent to 1,431.80 by the close in Moscow, the highest since May 22. The dollar-denominated RTS Index added 1.8 percent to 1,393.05. OAO Mechel, Russia’s biggest coking-coal producer, increased 3 percent to 97.60 rubles. Mechel’s ordinary and preferred shares have dropped more than 50 percent this year, the worst performers on the Micex.
Gazprom, which has the biggest weighting on the Micex at 15 percent, closed up 5.2 percent at 131.24 rubles, the strongest advance since October 2011. The stock is down 8.8 percent this year. Bernanke said today the central bank’s asset purchases “are by no means on a preset course” and could be reduced more quickly or expanded as economic conditions warrant.
“Gazprom is signaling the return of investor interest for the emerging markets,” Vladimir Bragin, head of research at Alfa Capital in Moscow, where he helps manage $2.9 billion, said by phone. “Investors tend to believe in the Fed right now and the Fed realizes that it shouldn’t scare the market. There’s always a risk that certain Bernanke comments might be misinterpreted and cause a selloff.”
The Micex surged 4.1 percent last week, the most since December 2011, after Bernanke said the world’s biggest economy will continue to need stimulus. The gauge slumped on June 20 after he signaled the central bank may wind down its bond buying if the U.S. economy performs in line with projections.
Gazprom rallied 5.3 percent to $8.06 in London, the 10th day of advances and the longest winning streak since March 1999.
OAO Dixy Group, the country’s third-largest retailer, tumbled 2 percent to 485.86 rubles, the most since July 9. OAO Magnit, Russia’s biggest food retailer, retreated 1.3 percent to 7,326.60 rubles, while global depositary receipts dropped 0.5 percent to $55.50. Consumer services shares were the biggest declining group on the Micex, losing 1.2 percent on average.
OAO Pharmstandard, the country’s biggest drugmaker, fell as much as 6.8 percent, before closing down 0.5 percent to 1,731.30 rubles, snapping three days of gains. The drugmaker purchased an additional 1.3 billion rubles of stock as of July 16, raising its buyback amount since February to 8 billion rubles and lifting its stake to 73 percent, the company said in a statement today.
Pharmstandard shares tumbled 34 percent from July 8 to July 11 after the company said it offered $630 million for Bever Pharmaceutical Pte Ltd., without disclosing why, and announced the spinoff of its own branded, non-prescription drugs business.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The volume of shares traded on the Micex today was 55 percent above the 30-day average, according to data compiled by Bloomberg, while 10-day price swings rose to 19.162. Thirty six stocks increased, while 14 declined, the data show.
Russia’s economy grew 1.6 percent in the first three months, the least since a 2009 recession, spurring calls for monetary easing. While Bank Rossii kept its main rates unchanged on July 12, it introduced a one-year floating-rate facility with a starting cost of 5.75 percent, compared with its 7.5 percent fixed-rate for similar-maturity loans.
Fixed-capital investment dropped 3.7 percent in June from a year earlier, the Federal Statistics Service in Moscow said by e-mail today. The median estimate of 16 economists in a Bloomberg survey was for a 0.5 percent increase. Unemployment unexpectedly rose to 5.4 percent from 5.2 percent in May.
The 50-member Micex’s 2.9 percent decline in 2013 compares with a 2.7 percent increase for India’s benchmark Sensex Index and Brazil’s Ibovespa Index’s 22 percent retreat.
The 14-day relative strength index on the Micex climbed to 71 from 66.9 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.
Crude oil, Russia’s main export earner, was little changed at $106.08 a barrel in New York. Russia receives about 50 percent of its budget revenue from oil and natural gas sales.
Thirty six stocks, or 72 percent, were trading above their 50-day moving average on the Micex yesterday. One closed at a 52-week low and one at a one-year high, according to data compiled by Bloomberg. The Russian Volatility Index, which measures expected swings in RTS futures, rose 1.5 percent today. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. added 1.6 percent to 92.58 today for the fifth day of advances.
The Micex trades at 5.4 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.