Ruble Gains Fourth Day on Tax as Micex Index Erases DeclinesVladimir Kuznetsov and Ksenia Galouchko
The ruble gained for a fourth day as Russian companies paid taxes and the main stock index erased declines as investors awaited news on further western sanctions.
The Russian currency climbed 0.2 percent to 42.2400 against Bank Rossii’s dollar-euro basket by 6 p.m. in Moscow, when the central bank stops its market operations. The Micex Index, which slid into a bear market last week, rose 0.1 percent to 1,320.50 by the close, having fallen as much as 1.2 percent earlier.
European Union leaders gathered in Brussels to discuss more sanctions after Russia’s annexation of Ukraine’s Crimea region. U.S. President Barack Obama said after the close of trading in Moscow that the U.S. will impose financial sanctions on a wider swath of officials and a Russian bank. The ruble was boosted as Russian companies must pay value-added tax today and mineral-extraction taxes on March 25.
“It’s impossible to turn back time and go back to February before the Crimea conflict started,” Vladimir Bragin, head of research at Alfa Capital Partners Ltd. in Moscow, said by phone. “Even if more sanctions are introduced, Russia won’t suffer.”
OAO Magnitogorsk Iron & Steel increased 7.3 percent to 5.42 rubles, the most since September 2012 and the fourth day of gains. The steelmaker may sell 5 percent of Fortescue Metals Group Ltd. by the end of the year, MMK’s shareholder and Chairman Victor Rashnikov said today in Moscow. The stock jumped 10 percent to $1.961 by 3:03 p.m. in London.
MMK rose “mostly because the company comfirmed that they may sell a 5 percent stake in Fortescue this year,” Kirill Chuyko, head of equity research at BCS Financial Group, said by e-mail. “The company may cut its debt.”
Emerging-market stocks fell 1.3 percent after U.S. Federal Reserve Chairwoman Janet Yellen indicated the central bank’s bond-buying program, which was reduced by $10 billion yesterday, will conclude by year-end with a rate increase to follow in “around six months.”
“Markets globally are falling on the Fed’s decision to curb the easing program further and on its signal that the rate increase will arrive as soon as this year,” Yuri Selyandin, a money manager at GHP Group in Moscow, said by phone today.
Russia’s dollar-denominated RTS Index slid 0.4 percent to 1,150.82.
OAO Sberbank, the nation’s biggest lender, slid 1.5 percent to 79.40 rubles. OAO GMK Norilsk Nickel dropped 2.8 percent to 5,841 rubles.
OAO Aeroflot, Russia’s largest airline carrier, rose 4.8 percent to 56.49 rubles, capping the biggest three-day advance since Sept. 2008. The stock surged 10 percent yesterday, the most since January 2009, after Interfax reported Russia doesn’t plan to cancel overflight fees for foreign carriers on trans-Siberia routes, citing Deputy Transportation Minister Sergey Aristov.
“Royalties constitute a significant part of Aeroflot’s revenues,” Bragin said.
Russian equities have the cheapest valuations among 21 developing countries monitored by Bloomberg, with shares on the Micex trading at 4.8 times projected 12-month earnings, compared with a multiple of 9.3 for the MSCI Emerging Markets Index.
Russian companies’ global depositary receipts in London extended declines. OAO Novatek, a natural gas producer controlled by billionaires Gennady Timchenko and Leonid Mikhelson, slumped 4.5 percent to $107 by 3:30 p.m after Obama’s announcement of wider sanctions. Timchenko was on the list of officials along with billionaire Arkady Rotenberg.
“The situation around Ukraine is concerning because of the way it has spoiled Russia’s reputation among global investors and there’s also fear of the sanctions,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd. in Moscow, said by phone. “Volatility is very high.”
The RTS Volatility Index, which measures expected swings in the stock-index futures, has more than doubled this year, the most on a quarterly basis since 2008, when Lehman Brothers Holdings Inc.’s bankruptcy spurred a rout across global markets. The gauge was up 3.6 percent today.
The yield on Russian government bonds due February 2027 rose eight basis points, or 0.08 percentage point, to 9.34 percent. It reached a record 9.71 percent on March 14. The ruble closed little changed at 36.17 against the dollar and strengthened 0.4 percent against the euro to 49.7350.
Russia’s monthly taxes traditionally support the local currency as companies convert export earnings into rubles to pay duty.
Taxes may bring a “fast bounce” for the ruble, as foreign investors betting against the currency close their “full-scale ruble risk reductions,” Maxim Korovin and Anton Nikitin, analysts at ZAO VTB Capital, said in an e-mailed note.
The ruble may get support from companies and individuals repatriating cash into Russia to avoid Western sanctions, Alexei Egorov, an analyst at OAO Promsvyazbank, said in an e-mailed note.