Micex to Ruble Post Weekly Gain as Sanctions Fallout Bets EaseKsenia Galouchko and Vladimir Kuznetsov
Russian stocks posted a weekly gain with the ruble on wagers expanded U.S. sanctions over Crimea won’t hobble the economy of the world’s biggest energy exporter.
The Micex Index added 0.9 percent to 1,344.12 by the close in Moscow, a 2.8 percent increase in the past five days. The gauge lost 11 percent this quarter and entered a bear market in March. The yield on state debt due February 2027 fell two basis points to 9.1 percent, a 32 basis point retreat in the week.
Russian markets are returning to levels seen before President Vladimir Putin’s decision to annex Ukraine’s Crimea region on bets further U.S. sanctions won’t go far enough to curb growth. Russia-dedicated stock funds received $219 million in inflows in the week ended March 26, the most in almost a year, UralSib Capital said in a note, citing EPFR Global data.
“Stocks have become quite attractive after the selloff,” Yuri Selyandin, a fund manager who helps oversee about $2 billion at GHP Group in Moscow, said by phone. “It’s too early to say sanctions will have a strong damaging effect on” Russia’s economy, he said.
The nation’s stocks trade at 3 times estimated earnings, the cheapest valuations among 21 developing countries monitored by Bloomberg. That compares with a multiple of 10.2 times for the MSCI Emerging Markets index.
U.S. President Barack Obama said Russia’s military, energy and financial industries would become possible targets if Putin pushes deeper into Ukraine. While additional sanctions would inevitably affect the economies of the U.S. and Europe, Obama said, the goal is to limit the collateral damage.
Standard & Poor’s sees a “steady de-intensification” of the Ukraine crisis as its base-case scenario, according to an e-mailed report today. The ruble may stabilize at current levels, capital outflows will probably decelerate to “more modest” rates, and inflationary pressures could “gradually” decrease, S&P analysts led by Tatiana Lysenko said in an e-mailed note.
“Although further sanctions from the EU and the U.S. may be imposed, our expectation is that these will not be so severe as to include wide trade restrictions on Russia or sanctions on the Russian financial system,” they said.
Russia fund inflows were the strongest since May 2013 this week, UralSib said today. Investors pulled $5.5 billion from Russian equities and bonds this year through March 20, approaching the total outflow of $6.1 billion for all of 2013, according to data compiled by EPFR Global.
Economists have reduced their expectations for Russia’s economic growth this year, projecting expansion of 1.2 percent, down from 2.2 percent last month, according to the median of 37 forecasts in a Bloomberg survey.
“Most investors have now mapped out possible Russian scenarios in Ukraine and the base case seems to be some more sanctions and control of Crimea,” Emad Mostaque, a London-based strategist at Noah Capital Markets, said by e-mail. “But the market has decided Iran-style sanctions or conflict with NATO are off the table.”
OAO M.Video gained 3.5 percent to 207.01 rubles, the fourth day of advances. Russia’s biggest electronics retailer yesterday reported a 38 percent increase in 2013 profit to 5.73 billion rubles ($160 million).
The dollar-denominated RTS Index added 0.6 percent to 1,186.28. VTB Group, the nation’s second-biggest lender, jumped 4.7 percent to 3.82 kopeks, the most on the Micex in percentage terms and the highest close since Feb. 28.
OAO Mechel, Russia’s biggest coking coal producer, tumbled 9.8 percent to 37 rubles, the steepest decline on the measure. A fire at a Dzhebariki-Khaya mine conveyor line that broke out today has been extinguished and nobody was injured, Arseniy Palagin, a spokesman at Mechel, said by e-mail.
The ruble slipped 0.2 percent to 35.6730 against the dollar by 6 p.m. in Moscow, paring its gain in the past five days to 1.4 percent. Russian companies met tax-payment deadlines this week, including 290 billion rubles of corporate income tax due today, according to the median of three estimates compiled by Bloomberg.
“That sent the currency strengthening beyond 36 rubles per dollar, which in turn triggered the closing of short positions by several large players,” Dmitry Dorofeev, a money manager at BCS Financial Group in Moscow, said in an e-mail.
Russia’s currency is down 7.9 percent versus the dollar this year, the second-worst performance among 24 emerging-market peers monitored by Bloomberg after Argentina’s peso. The ruble fell 0.2 percent to 41.6868 versus the central bank’s target basket of dollars and euros today.