Futures Gain as Valuations Trump Blasts: Russia OvernightHalia Pavliva
Russian stock futures gained and contracts on the nation’s biggest company, OAO Gazprom, rose as the cheapest valuations among emerging-market equities outweighed concerns bomb blasts in the country’s south will hurt economic growth.
RTS stock index futures expiring in March increased 0.1 percent in U.S. hours to 144,590 after the 30-stock Micex Index added 0.6 percent to 1,504.08 in Moscow yesterday. Gazprom futures increased 0.8 percent. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in New York slipped 0.2 percent to 101.49 yesterday as OAO Mechel rallied 5.3 percent.
Suicide bombers at a train station and on a trolleybus killed more than 30 people over 24 hours in the southern city of Volgograd, raising the security threat less than six weeks before Russia hosts the Winter Olympics. Stocks on the benchmark Micex Index trade at the cheapest valuations among 21 emerging-market economies monitored by Bloomberg, with the average multiple at 4.7 times forward earnings, less than half the 11.8 level for the MSCI Emerging Markets Index.
“Investors are willing to take their chances as the market is cheap enough to pay for most of the risks,” Ian Hague, founding partner of New York-based Firebird Management LLC, which manages $1.1 billion of assets including about $400 million in Russian stocks, said by phone yesterday.
Volgograd, which suffered another suicide bombing on a bus in October, is about 700 kilometers (435 miles) northeast of Sochi, where Russia is hosting the Olympic games in February. The Micex Index closed little changed on the day of the attack two months ago.
Russia’s gross domestic product expanded 1.2 percent in the third quarter, the slowest pace since a contraction in 2009. The Moscow bourse will shut for four days for New Year holidays starting Dec. 31. The exchange will also close Jan. 7 for Russian Orthodox Christmas.
The Russia-US Index is set for a 2.2 percent gain this year, which compares with a 5 percent decline for the MSCI Emerging Market Index. The Market Vectors Russia ETF fell 0.2 percent to $28.46, widening its drop this year to 4.8 percent.
The Micex’s mean 4.3 valuation this year compares with an 8.5 multiple mean for the past 10 years, according to data compiled by Bloomberg.
“Investors are willing to take risks at these low price levels,” Ilya Kravets, the New York-based director of investment research at Daniloff Capital LLC, said by phone yesterday. “Things are so bad already that they can’t get worse, they can only get better.”
American depositary receipts of Mechel, Russia’s largest producer of steelmaking coal, increased to $2.58, paring its slump this year to 63 percent.
Futures on Gazprom rose to 141.91 rubles, or $4.32, in U.S. hours. The ADRs fell 0.4 percent yesterday to $8.48, extending their third annual decline to 13 percent. One ADR equals two Moscow-listed shares.