Russian stocks rose, with the RTS Index climbing 20 percent from this year’s low, as crude gained and signs U.S. lawmakers will agree on a compromise debt deal boosted appetite for riskier assets.
The dollar-denominated RTS added 1.6 percent to 1,484.82 by the close in Moscow, entering a so-called bull market. The Micex Index rallied 1 percent to 1,516.73, the strongest level since Feb. 19, taking its advance from a 2013 low on June 13 to 18 percent. OAO Novatek, Russia’s second-biggest natural gas producer, increased 3.8 percent to 407 rubles. OAO Sberbank, the nation’s largest lender, closed up 2.1 percent at 103.70 rubles, the highest since May 28.
U.S. House Republican and Senate Democratic leaders are open to a short-term increase in the $16.7 trillion debt limit, said congressional aides of both parties who spoke on condition of anonymity. Novatek’s billionaire shareholder Gennady Timchenko said it’s in talks with companies from India, Japan, South Korea and China to sell a 9.9 percent stake in the Yamal liquefied natural gas project. Crude rose 1.1 percent to $102.71 in New York.
“The topic of the week is the U.S. budget talks, but there’s a certainty among investors that the debt ceiling will be lifted in time to avoid default,” Aleksei Belkin, who helps manage about $4.4 billion in assets as chief investment officer at Kapital Asset Management LLC in Moscow, said by phone. “The Russian market was so oversold that now it’s attracting investors who are focusing on the most liquid stocks like Gazprom and Sberbank.”
Economists say a failure by the world’s largest borrower to repay its debt will devastate stock markets and throw the U.S. and world economies into a recession. Russia receives about half of its budget revenue from the oil and natural-gas industries.
“When all of emerging markets sold off, Russia looked like it was overdone,” Bruce Bower, a partner at Verno Capital in Moscow, which manages about $200 million in assets, said by e-mail. “It looks well-insulated from the Fed tapering, cheap valuations and high dividend yields amongst blue chips -- so it was a natural candidate to rebound strongly.”
The dividend yield on the Micex is 4.1 percent, compared with 2.7 percent for the MSCI Emerging Markets Index.
Novatek jumped to the highest since March 2012 in Moscow and rose 3.1 percent to $140.30 in London. Sberbank gained 2.4 percent to $12.85. OAO Gazprom advanced 1.8 percent to $9.48 in London and rose 1.4 percent to 153.30 rubles in Moscow. VTB Group, the nation’s second-biggest lender, gained 1.4 percent to 4.272 kopeks in Moscow and 1.3 percent to $2.65 in London.
EON Russia surged 4.7 percent to 2.549 rubles, the biggest advancer on the Micex. The company will stick to a dividend payout of between 40 and 60 percent and is targeting 38 billion rubles in earnings before interest, taxes, depreciation and amortization in 2015, Chief Executive Officer Maxim Shirokov said on a conference call today.
Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the index trading at 4.5 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index.
OAO Tatneft, a regional oil producer, increased 2 percent to 218.07 rubles. JPMorgan Chase & Co. raised the stock to the equivalent of buy from sell, according to an e-mailed note. Ten-day price swings on the Micex fell to 14.837 from 15.472 yesterday.