Micex Rebounds With Bonds as Losses Seen Overdone; Ruble Gains
Russian stocks rebounded from the steepest drop in four months, led by OAO Sberbank and OAO Lukoil, after rebels in Ukraine released bodies from the Malaysian jet crash site. Government bonds and the ruble gained.
The Micex Index (INDEXCF) rose 1.6 percent to 1,405.97 by the close in Moscow, after dropping the most since March 3 yesterday, when a technical indicator signaled losses were overdone. Sberbank, Russia’s biggest lender, rose 2.3 percent, while Lukoil, its second-biggest oil company, climbed 1.6 percent. The ruble headed for the strongest advance in almost two weeks and the yield on the benchmark 2027 sovereign ruble bond declined.
As a train carrying victims’ remains from the jet shot down over rebel territory in Ukraine arrived in the government-held city of Kharkiv, EU foreign ministers in Brussels were debating how to deliver on the bloc’s commitment to deepen sanctions by expanding a 72-person blacklist. The ruble advanced as companies converted export revenue to pay taxes and dividends.
“We’re seeing a bounce today as the market fell for six straight days amid really negative newsflow,” Vladimir Bragin, head of research at Alfa Capital Partners Ltd. in Moscow, said by phone. “Despite Russia’s attempts to prove its innocence, there’s a risk of new sanctions.”
The ruble advanced 0.6 percent to 34.98 per dollar. Russian companies face about 373 billion rubles ($10.6 billion) in tax payments this week and 543 billion rubles in dividends in the coming two weeks, according to Sberbank CIB. The currency tumbled 2.3 percent on July 17 after the U.S. announced new sanctions against businesses and the Malaysian Airlines jet was downed over eastern Ukraine.
The ruble strengthened 0.8 percent against the central bank’s basket of dollars and euros and climbed 0.9 percent against the euro.
The yield on the 2027 government bonds declined 13 basis points to 9.1 percent after yesterday reaching the highest level since May 6.
The Finance Ministry canceled its first ruble bond auction in three months after yesterday’s surge, citing “unfavorable market conditions” in a statement on its website today.
U.S. exchange-traded funds that invest in Russia led net outflows of capital from emerging markets in the past five days. Russia-focused ETFs lost $83.6 million in the period, according to data compiled by Bloomberg.
Natural-gas company OAO Gazprom advanced 1.3 percent while oil producer OAO Bashneft climbed 9.3 percent after losing 21 percent in the previous four days. The Micex’s 14-day relative strength index fell below 30 yesterday, signaling to some analysts the gauge was oversold.
Bonds, stocks and the ruble slumped on July 17 after the U.S. leveled fresh sanctions against Russian companies. About $47 billion was erased from the gauge’s market value last week, the most in four months, according to data compiled by Bloomberg. The U.S. blocked OAO Rosneft, OAO Novatek, OAO Gazprombank and Vnesheconombank from accessing U.S. equity or debt markets for new financing with maturities longer than 90 days.
Russia will resist ultimatums from the U.S. and European Union aimed at destabilizing his nation, President Vladimir Putin said at a meeting of the Security Council in the Kremlin. Putin accused the U.S. and its allies of exploiting the crash of Malaysian Air flight 17 to force him to renounce support for people of Russian heritage in Ukraine.
New sanctions would threaten an economy forecast to grow 0.5 percent this year, the slowest pace since a contraction in 2009, according to a Bloomberg survey.
The Micex trades at 5.1 times estimated earnings, making it the cheapest measure among 21 emerging markets tracked by Bloomberg. That compares with a multiple of 5.3 at the end of February, before Russia’s incursion in Crimea. The dollar-denominated RTS Index (RTSI$) rose 2.2 percent to 1,266.88, the biggest jump in a month.
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