Russian Energy Companies Lead Stocks Higher as Oil Surpasses $50

  • Ruble may come under short-term pressure if rate cut: Citi
  • MTS shares surge on window, allowing conversion into ADS

Russian equities rose, led by oil and gas stocks, as crude above $50 a barrel boosted the outlook for producers in the world’s biggest energy exporter and speculation the Fed won’t raise rates in June fueled appetite for high-yielding emerging-market assets.

The Micex Index of shares climbed 1.5 percent to 1,915.54 by the close in Moscow, the first day of gains in five and the biggest advance since April 28. Natural-gas exporter Gazprom PJSC and oil producer Rosneft PJSC were among the strongest performers in the gauge. Brent crude jumped 1.7 percent to $50.47 a barrel on wagers a supply glut will shrink faster than projected.

Developing-nation markets were given a fillip on Friday after weak U.S. jobs data crushed bets the U.S. central bank will increase interest rates in the coming two months. Sales of oil and natural gas bring in about a third of Russia’s budget revenue and almost 60 percent of exports.

“The optimism in the Russian market is driven by oil trading above $50 and poor U.S. jobs data that spurred global risk-on sentiment,” Vladimir Vedeneev, chief investment officer of Raiffeisen Asset Management in Moscow, said by e-mail.

Mobile TeleSystems PJSC, Russia’s largest wireless carrier, rose 5.5 percent to 267 rubles, the most since April 11. MTS on Monday announced the opening of a “window” to convert local shares into American Depository Shares from June 9 until June 16, allowing shareholders to bid an additional 87.9 million securities for conversion into 44 million ADS at a two to one ratio.

Ruble, Rates

The ruble added 0.3 percent after surging 2 percent on Friday. Investors are preparing for the Bank of Russia’s key rate meeting at the end of the week, and economists are split on whether policy makers will cut or hold the benchmark rate. Lower inflation, combined with stabilizing oil and the ruble’s 12 percent comeback this year, may tip the balance in favor of a rate cut even as inflation remains almost double the 4 percent goal.

The ruble “may come under temporary pressure” if the central bank cuts the key rate on Friday, Ivan Tchakarov, an economist for Russia at Citigroup Inc. in Moscow, said by e-mail. At the same time “a rate cut may also be viewed as ruble-positive in the longer-term. In the sense that it signals the central bank’s confidence in structurally declining inflation."

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