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Russia Stocks Post Longest Rally Since 2005 as Ruble Gains

Micex Index
More than half of the stocks on the Micex are trading above their 50-day moving average amid a rally that’s gained momentum since Putin said last week he would do all he could to bring an end to months of bloodshed in Ukraine. Photographer: Andrey Rudakov/Bloomberg

The Micex Index rose for a 10th day in the longest winning streak in nine years on bets President Vladimir Putin’s meeting with his Ukrainian counterpart next week will reduce tension. The ruble strengthened.

The gauge added 1 percent to 1,461.75, bringing the 10-day advance to 9.6 percent, the biggest stretch of gains since the 11 days ended Sept. 2, 2005. The ruble appreciated for the first time in three days, strengthening 0.2 percent to 36.24 per dollar by 6 p.m. in Moscow, when the central bank stops its market operations.

President Petro Poroshenko and Putin agreed to meet in Minsk on Aug. 26 to discuss de-escalation, triggering bets the standoff over Ukraine may be closer to a resolution. U.S.-based exchange-traded funds investing in Russian shares have had inflows of $110 million since Aug. 7, equivalent to 4.9 percent of their market value, data compiled by Bloomberg show.

“Russian shares are a proxy for perceived East-West tensions, and any sign of a breakthrough -- however faint -- sparks a rally,” Nicholas Spiro, a managing director at Spiro Sovereign Strategy, said in e-mailed comments.

The Red Cross said trucks with Russian humanitarian aid may start crossing the border with eastern Ukraine tomorrow, where months of fighting has cut off water and electricity to residents of the region’s biggest cities.

‘More Comfortable’

“The geopolitical situation at this point is supporting the gains,” Joseph Dayan, head of markets at BCS Financial Group in London, said in e-mailed comments. “Investors feel more comfortable picking up more Russian equity.”

OAO Sberbank, the nation’s biggest lender, contributed most to the Micex’s rally, rising 2 percent to the highest close since July 18. U.S.-sanctioned independent gas producer OAO Novatek added 1.6 percent.

“There are some great levels for key assets in Russia such as Sberbank and Novatek,” which are “priced exceptionally well,” Dayan said.

The yield on Russia’s 10-year local-currency bonds fell five basis points to 9.29 percent. The ruble advanced 0.2 percent to 48.0955 per euro today and also traded 0.2 percent stronger at 41.5648 against the central bank’s target basket of dollars and euros.

The Micex trades at 5.2 times projected 12-month earnings, less than half the multiple for the MSCI Emerging Markets Index.

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