Russian stocks rose, led by exporters including OAO Gazprom, as the European Central Bank’s surprise rate cut offset concern over lower domestic growth forecasts.
The Micex Index climbed 0.6 percent, the biggest increase since Oct. 18, to 1,509.25 by the close in Moscow, after dropping as much as 0.3 percent earlier. OAO Gazprom, the natural-gas export monopoly, increased 2.1 percent to 150.33 rubles. OAO Severstal added 3.5 percent to 292.90 rubles, the largest advance in percentage terms on the Micex, after UBS AG added the steelmaker to its most-preferred stock list.
The European Central Bank lowered its benchmark interest rate to a record 0.25 percent, after a drop in euro area inflation to the slowest pace in four years. Russia cut its average annual economic growth forecast to 2.5 percent through 2030, Economy Minister Alexei Ulyukayev said today. Europe is Russia’s main trading partner.
“The reduced benchmark rate gives increased hope for the acceleration of the euro zone’s recovery, which in turn gives hope that this will impact Russia, particularly the exporters,” Kirill Yankovskiy, director for equity sales at UralSib Capital in London, said by e-mail. “This explains why Gazprom, which is a proxy for Russia’s exports, is outperforming.”
Gazprom’s London-listed stock increased 1.2 percent to $9.22 at 3:09 p.m. Shares of Severstal jumped 2.3 percent.
Russia’s central bank will probably leave its main lending rates unchanged for a 14th month at its meeting tomorrow, according to all 24 economists in a Bloomberg survey. Policy makers have held rates for more than a year in a bid to tame inflation, which probably eased to 6.1 percent this month, the Economy Ministry said in an e-mailed report on Nov. 1. The rate was 6.3 percent in October.
“Considering that we’ll see the economic slowdown lasting until at least 2030, the central bank’s short-term stimulus measures, like a rate cut, won’t make any significant difference,” Vladimir Bragin, head of research at Alfa Capital in Moscow, said by phone.
Corporate earnings will suffer from excessive capital expenditure in many industries and from the deterioration in Russia’s structural growth rate, exacerbated by a slowdown in China, Deutsche Bank AG analysts said today in an e-mailed note. Russia remains a “value trap,” they said, reiterating their underweight rating.
President Vladimir Putin is committing as much as 40 percent of the National Wellbeing Fund to improve infrastructure as the economy faces its weakest pace of growth since the 2009 contraction. The funds will go toward infrastructure projects, including Trans-Siberian railroads, First Deputy Prime Minister Igor Shuvalov said yesterday.
“Russia is virtually launching its own quantitative-easing program by injecting the economy with cash via infrastructure projects,” Bragin said.
OAO TMK fell as much as 1.6 percent before closing 1.4 percent higher. The stock, along with OAO Inter RAO UES and LSR Group, may be removed by MSCI Inc. during an index rebalancing set to take place today, according to VTB Capital.
The RTS Index added 0.6 percent to 1,468.22. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.3 times projected 12-month earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.