Russian stocks in Moscow, London and New York are headed for the biggest quarterly gain since September amid signs the Ukraine crisis is winding down and as oil prices surged on rising tension in the Middle East.
The Bloomberg index of the most-traded Russian stocks in the U.S. is set for a 9.1 percent gain since March while the Market Vectors Russia exchange-traded fund has surged 12 percent. The Russian Depositary Index of companies listed in London rose 12 percent for the three months and the Micex Index is up 7.9 percent.
Ukraine extended a cease-fire with pro-Russian rebels last week, adding to efforts aimed at quelling a conflict that sparked a selloff in Russian equities in March and April. The U.S. and European Union have refrained from imposing deeper sanctions against President Vladimir Putin even as they accuse his government of helping separatists in eastern Ukraine. Crude oil, Russia’s biggest export, has gained 3 percent this month as sectarian violence erupted in Iraq.
“The actual sanctions applied have been much less damaging than feared and the impact on the economy has been slight,” Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory, said by e-mail on June 27. “The rising oil price, which improves Russia’s budget performance and fiscal position, has also acted as a recovery catalyst.”
Weafer, who was rated by a Euromoney Institutional Investor Plc poll as Russia’s best equity strategist in 2013, said he favors Russian technology shares, such as Yandex NV, along with oil company OAO Lukoil and gas producer OAO Gazprom.
The Bloomberg Russia-US gauge is still down 9.1 percent this year and the Market Vectors ETF has fallen 7.3 percent.
Short sellers, who borrow shares and sell them to profit from declines, are backing away from bearish bets on the Market Vectors fund. Short interest as a percentage of total shares outstanding plummeted to 3.5 percent on June 26, down from 21 percent in early March, the highest level on record.
American depositary receipts of OAO RusHydro, a state utility, surged 30 percent this quarter to $1.99, the biggest three-month advance on record. OAO GMK Norilsk Nickel, the world’s largest producer of nickel and palladium, added 19 percent to $19.88, the best quarter since 2012. Gazprom added 13 percent to $8.81, rebounding from a 10 percent slide in the first quarter.
Ukraine, along with the U.S and the EU, accuses Russia of stoking turmoil in Ukraine by supporting pro-Russian separatists, including supplying them with weapons. Russia has denied providing such support, while urging Ukraine’s new government to do more to protect the rights of Russian speakers in the country.
Putin asked lawmakers last week to revoke his authority to use force in Ukraine in a conciliatory move that follows his meeting with Ukrainian President Petro Poroshenko on June 6. The Market Vectors fund, the biggest U.S. ETF that holds Russian shares, rose 1.1 percent to $26.76 for the five days while the Bloomberg Index of the most-traded Russian shares in the U.S. climbed 0.6 percent to 93.07.
United Co. Rusal, a Moscow-based aluminum producer, dropped 0.8 percent to HK$3.53 in Hong Kong trading as of 10:37 a.m. local time.
“The market has been rallying for the past two months because of a meaningful deescalation in the Ukraine conflict,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said by phone on June 27. “The market has already returned to its pre-crisis levels. What would be needed for a further rally in the market is a more affirmative acceleration of economic growth in Russia.”