Russia, the emerging stock market that benefited the most from quantitative easing in the U.S., is getting a boost as speculation grows the Federal Reserve will cut stimulus less than investors had anticipated.
The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. jumped to the highest level since May yesterday, led by OAO Sberbank, after former U.S. Treasury Secretary Lawrence Summers withdrew his bid to become Federal Reserve chairman. Summers would have tightened Fed policy more than Janet Yellen, who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll last week. RTS Index futures expiring December slipped in U.S. hours.
The Micex Index, which posted the biggest gain among emerging-market gauges yesterday after Turkey, advanced an average 77 percent during the Fed’s first two rounds of bond buying, and fell 0.6 percent in periods of no stimulus, the biggest difference of 46 emerging and developed markets tracked by Bloomberg. Russian equities also are luring demand with the lowest valuations among 21 emerging countries.
“Demand for riskier assets overall will increase as investors expect less reduction in stimulus, and demand for Russian equities will benefit the most because they are the cheapest,” Mark Rubinstein, head of research at IFC Metropol in Moscow, said by phone yesterday. “Optimism is back in the market.”
The Federal Open Market Committee is scheduled to meet Sept. 17-18 to consider the future of quantitative easing. Economists expect the Fed to reduce monthly asset purchases to $75 billion from $85 billion, according to a Sept. 6 Bloomberg News survey.
American depositary receipts of Sberbank, Russia’s biggest lender, climbed 3.3 percent to a two-month high of $12.17 in New York. The Moscow-based lender raised 159.3 billion rubles ($4.9 billion) in September 2012, a few days after the announcement of the Fed’s third round of asset buying, in the largest share sale by a Russian company since before the global recession.
Sberbank, which accounted for about 45 percent of retail deposits in Russia as of April 1, said deposits grew 8 percent in the first eight months of the year, according to a Sept. 6 statement on its website. Shares rose 3.4 percent to 99 rubles, or $3.07, in Moscow yesterday.
Russia’s Micex Index climbed an average 77 percent during the Fed’s first two courses of so-called quantitative easing. Since the announcement of QE3 on Sept. 13 to yesterday’s close, the Micex has slipped less than 0.1 percent, compared with a 2 percent advance in the MSCI Emerging Markets Index.
The ruble surged to the strongest level in almost three months, buoyed by appetite for emerging-market assets. Russia’s currency gained 0.6 percent to 32.2775 per dollar yesterday and strengthened 0.5 percent to 37.1164 against the dollar-euro basket used by the central bank to manage swings that erode exporter competitiveness. Ruble futures showed the currency weakening 0.5 percent to 30.51 per dollar in U.S. hours.
“Sberbank benefits from a stronger ruble because it improves the value of their ruble bond portfolio and makes it easier for the central bank to ease rates,” Julian Rimmer, a trader with CF Global Trading UK Ltd. in London, said by e-mail yesterday.
The Bloomberg Russia-US gauge rose 1.3 percent yesterday to 96.46, the highest since May 8. Futures on the RTS index expiring in December slipped 0.3 percent to 142,760.
The Market Vectors Russia ETF, the largest exchange-traded fund dedicated to Russian equities, gained 1.6 percent to a six-month high of $28.61. The RTS Volatility Index, which measures expected swings in the stock futures, fell 2.2 percent to 21.61.
OAO GMK Norilsk Nickel rallied 1.8 percent to $14.47 in New York yesterday, the highest level since July 23. The ADRs settled at a 0.7 percent discount to the company’s Moscow-listed shares, the most since Sept. 4.