March 18 (Bloomberg) -- Russian stocks rallied after President Vladimir Putin said he wasn’t seeking to split up Ukraine following the Crimea region’s admission to the Russian Federation. The Finance Ministry pulled its sixth bond auction this year after borrowing costs climbed.
The Micex Index, which slumped into a bear market last week, closed up 4.1 percent at 1,335.86, the strongest two-day gain since May 2010. Yields on government bonds due February 2027 fell 14 basis points to 9.22 percent. The ruble slipped 0.1 percent to 42.7758 against Bank Rossii’s target basket of dollars and euros.
Russia wishes no harm to Ukraine and has no ambitions in other regions, Putin said today, before asking lawmakers to approve Crimea’s accession. Markets climbed yesterday as investors wagered European Union and U.S. sanctions targeting Russian and Ukrainian officials would have little impact.
“Putin’s speech signaled that there won’t be an escalation of the conflict as Russia isn’t seeking to split Ukraine,” Anvar Gilyazitdinov, a money manager at Rye, Man & Gor Securities in Moscow, said by phone. “The market is reacting on the clarification of the situation. Investors think sanctions will be mild and that the conflict is nearing its end.”
European leaders may add names to their blacklist and consider a wider range of economic sanctions at a summit on March 20-21. The EU yesterday imposed penalties on 21 individuals, including travel-visa bans and asset freezes, while the U.S. applied sanctions on seven officials.
Putin last month won the authorization of the upper house of parliament to deploy troops in Crimea and southeastern Ukraine to protect the rights of Russian-speakers and those of Russian heritage. A Crimean referendum that backed joining Russia on March 16 was “open and fair,” he said.
“Don’t believe those who scare you with Russia, who yell that Crimea will be followed by other regions,” Putin told lawmakers today in Moscow. “We don’t want to split up Ukraine, we don’t need that.”
The comments mark the “best-case scenario at this point,” Joseph Dayan, the head of markets at BCS Financial Group in London, said by e-mail. “He clearly said that east Ukraine is off limits.”
The Finance Ministry scrapped a bond sale planned for March 19, citing “unfavorable market conditions” in a statement on its website. The yield on the February 2027 ruble bond surged 30 basis points on March 14 to 9.71 percent, the highest since the notes were sold in 2012.
Tensions in Ukraine have deepened the ruble’s drop since the start of the year and the currency’s 9.4 plunge versus the dollar makes it the second-worst performer among emerging markets tracked by Bloomberg after Argentina’s peso.
OAO Rosneft gained for a fourth day, rising 2.2 percent to 232.92 rubles after Chief Executive Officer Igor Sechin said he was ready to buy more stock in Russia’s biggest oil producer. OAO Gazprom, the nation’s biggest natural gas producer, climbed 5.6 percent to 127 rubles.
Russian equities have the cheapest valuations among 21 developing countries monitored by Bloomberg, with shares on the Micex trading at 4.8 times projected 12-month earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.
To contact the editors responsible for this story: Wojciech Moskwa at email@example.com Chris Kirkham, Zahra Hankir