Russian shares rose, extending their weekly gain, as metal producers rallied after China removed its floor on lending rates, fueling bets demand for commodities will increase.
The benchmark Micex Index closed up 0.4 percent at 1,421.67 in Moscow, a 1.7 percent increase in the week. The dollar-denominated RTS Index jumped 0.4 percent to 1,382.33. OAO Severstal, Russia’s second-largest steelmaker, gained 4.2 percent to 248 rubles, while OAO Novolipetsk Steel rose 2 percent to 48 rubles.
The People’s Bank of China said there won’t be any floor for lending rates from tomorrow as economic growth slows. The Micex climbed earlier this week on speculation U.S. Federal Reserve Chairman Ben S. Bernanke will keep stimulus measures in place. Crude oil, Russia’s main export earner, added 0.6 percent to $108.63 a barrel in New York, trading near the highest price in 16 months.
“The Chinese government has implemented strong easing measures, Russian metal and oil stocks are poised to benefit the most,” Alexander Kostyukov, an analyst at Veles Capital in Moscow, said by phone. “China is a major importer of oil and metals. Bernanke’s comments this week also boosted the mood, although they were expected.”
Russia receives about 50 percent of its budget revenue from oil and natural gas sales. Standard & Poor’s GSCI Index of commodities rose 0.2 percent. Bernanke said on July 17 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.
Today’s announcement builds on pledges by Premier Li Keqiang to expand an overhaul of interest rates, a development the World Bank says must be a priority in reform of the financial system. OAO Sberbank, Russia’s biggest lender, advanced 1.5 percent to 99.93 rubles, while the London stock added 1.4 percent to $12.35.
Novolipetsk rose 1.7 percent to $14.75 in London and Severstal advanced 4.2 percent to $7.65. OAO Magnitogorsk Iron & Steel increased 1.5 percent to 8.403 rubles, adding 2.4 percent to $3.369 in London.
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. Russia’s economy grew 1.6 percent in the first three months, the least since a 2009 recession, spurring calls for monetary easing.
Russian stocks fell the most in a month yesterday after a court sentenced Alexey Navalny, a leading opponent of President Vladimir Putin, to five years in prison. Navalny was released today while he appeals the ruling.
The country’s equities trade at the cheapest valuations based on estimated earnings among 21 emerging economies tracked by Bloomberg. The country is ranked the most corrupt nation among the Group of 20 advanced economies in Berlin-based Transparency International’s 2012 Corruption Perceptions Index.
Navalny, a lawyer and blogger who’s campaigned to expose fraud and waste at state companies and corruption by officials, is the most prominent opponent of Putin to face prison since former Yukos Oil Co. owner Mikhail Khodorkovsky, once Russia’s richest man.
Several thousand protesters gathered yesterday for an unsanctioned rally in support of Navalny near the Kremlin. Police detained some demonstrators and blocked off streets amid shouts of “Freedom to political prisoners.”
The volume of shares traded on the Micex was 9.8 percent above the 30-day average, data compiled by Bloomberg show, while 10-day price swings rose to 20.53, the highest since June 27. The 50-member Micex’s 3.6 percent decline in 2013 compares with a 3.7 percent increase for India’s benchmark Sensex Index and Brazil’s Ibovespa Index’s 22 percent loss.
The 14-day relative strength index on the Micex rose to 66 from 65 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.
OAO Russian Grids fell 2.5 percent to 1.226 rubles, the biggest decliner on the stock measure. Moscow’s government plans to consolidate power-grid assets and sell them to Russian Grids, formerly known as MRSK Holding before its merger with Federal Grid Co., either for cash or for a stake in the merged company, the Kommersant newspaper reported.
Thirty seven stocks, or 74 percent, were trading above their 50-day moving average on the Micex yesterday. None closed at a 52-week low or at a 52-week high, according to data compiled by Bloomberg. The Russian Volatility Index, which measures expected swings in RTS futures, dropped 1.8 percent today, the first decrease in three days. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. added 0.7 percent to 92.66.
The Micex trades at 5.4 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.