OAO Sberbank rallied the most in three months and OAO VTB Bank surged as MSCI Inc.’s decision to leave the lenders in its Russian equity index eased concern that they will be hurt by international sanctions.
American depositary receipts of Sberbank, which holds about half of Russia’s deposits, rallied 5.1 percent to $8.38 in New York yesterday, the biggest gain since May 7. VTB jumped 4.2 percent to $2.14 in London. The Market Vectors Russia ETF, the largest U.S. exchange-traded fund tracking the nation’s companies, rose 1.4 percent to $24.13. The MSCI Emerging Markets Index increased 1.5 percent.
MSCI Inc. said on Aug. 8 it decided to keep the banks in its Russia index after consulting with investors about U.S. and European Union measures barring purchases of new bonds or stocks from Moscow-based lenders. The stocks also gained as emerging-market equities advanced the most since November after Russia’s Defense Ministry said it’s ending drills in the southern Astrakhan region and President Vladimir Putin urged Ukraine to halt fighting in the nation’s east.
“It’s a relief rally,” Slava Smolyaninov, chief strategist at UralSib Financial in Moscow, said by phone. “The worst fears that investors had last week didn’t materialize as MSCI refrained from cutting the lenders from its gauge and the Ukraine crisis seems to be de-escalating.”
The U.S. sanctions against the lenders prohibit transacting with, providing financing for or otherwise dealing in new debt of longer than 90 days maturity or new equity. The EU on July 31 blocked purchases of new equity and bonds issued by the banks.
The Ukraine crisis has spurred a $21.5 billion reduction in Sberbank’s market capitalization this year, data compiled by Bloomberg show. Trading volume in the ADRs yesterday was more than 4.4 times the full-day average of the past three months.
Twenty-nine analysts covering Sberbank’s Moscow-listed stock recommend buying the shares, while one advises selling, according to data compiled by Bloomberg. The consensus rating, on a scale from 1 to 5, is 4.87, the highest among the world’s 50 biggest banks by assets, the data show.
The Micex Index rallied 1.8 percent to 1,372.45 at the close in Moscow yesterday. Sberbank’s preferred shares rallied 6.3 percent and VTB increased 3.9 percent. The benchmark Russian gauge has lost 8.8 percent this year.
Futures on the dollar-denominated RTS index increased 0.2 percent to 120,230. The RTS Volatility Index, which measures expected swings in futures, rose 0.2 percent to 35.10. Moscow-based United Co. Rusal added 1 percent to HK$4.06 at 11 a.m. in Hong Kong trading.
Russia’s economic growth slumped to 0.8 percent in the three months through June, the weakest in five quarters, the Federal Statistics Service said in an e-mailed statement yesterday, citing its first estimate. That was more than the median 0.7 percent forecast of 20 economists surveyed by Bloomberg. The Economy Ministry had projected 1.1 percent expansion.
“The growth rate is a concern longer term,” UralSib’s Smolyaninov said. “If there are more sanctions on Russia, its growth rate will slow further. There is a lot of uncertainty, including on whether Ukraine will restrict imports of Russian energy through its territory to Europe and approve other measures.”
Ukraine’s military yesterday called on civilians to leave the separatist strongholds of Donetsk and Luhansk as troops closed in. The U.S., the EU and NATO all reiterated warnings yesterday to Putin that a planned aid mission to the region can’t be a pretext for military intervention in support of the pro-Russian separatists. Putin spokesman, Dmitry Peskov, said the army wouldn’t be involved, the government’s RIA news service reported yesterday.
“There is no fundamental change in Russia’s relationship with the West, and the rally looks like a short break,” Vladimir Tikhomirov, the chief economist at BCS Financial Group in Moscow, said by phone yesterday. “It doesn’t look like we’ve passed the bottom yet as the Ukraine crisis remains unsolved. There is a concern there will be more sanctions on Russia, including by Ukraine, and that would further slow economic growth.”