Ruble to Stocks Post Weekly Gain on Ukraine Wagers, Inflows

Russian bonds advanced with the Micex Index and the ruble strengthened on investor optimism tensions over Ukraine are abating.

The currency rose 0.7 percent to 41.1592 versus the central bank’s basket of dollars and euros by 6 p.m. in Moscow, a 1.5 percent weekly gain. The Micex climbed 1.2 percent to 1,382.41 at the close, the strongest level since Feb. 28 and 2.9 percent higher since March 28. The yield on ruble-denominated government notes due 2023 fell 11 basis points to 8.81 percent.

Russia-dedicated stock funds received $119 million in the week ended April 2, the second consecutive week of inflows, according to EPFR Global. Markets have been returning to levels seen before President Vladimir Putin’s decision to annex Ukraine’s Crimea region last month triggered a selloff in stocks and bonds that sent the benchmark equity gauge to an almost four-year low and the 2023 yield to a record-high 9.70 percent.

“The last couple of weeks have been relatively good,” Slava Smolyaninov, chief strategist at UralSib Capital in Moscow, said by e-mail today. The potential for escalation in Ukraine was overstated amid “rising inflows of international capital into emerging markets, and Russia assets specifically,” he said.

Federal Grid Co. dropped 3 percent to 7.438 kopeks. The company said today its 2013 net loss was 233 billion rubles ($6.6 billion) compared with net income of 7.3 billion rubles a year earlier.

NATO Warning

OAO Sollers, Ford Motor Co.’s Russian carmaking partner, surged 9.8 percent to 549.10 rubles, the biggest gain since September 2012. The company is scheduled to publish 2013 results on April 7. Some investors are speculating the company’s dividend will be “in the range of 10 percent, which we think is exaggerated somewhat,” Smolyaninov said.

OAO Gazprom, the nation’s biggest company and natural gas producer, jumped 2.2 percent while OAO Sberbank, the Russia’s largest lender, rose 1.8 percent.

North Atlantic Treaty Organization leaders warned this week they haven’t seen signs of a significant reduction in Russian military forces on Ukraine’s border and any incursion would be an “historic mistake.”

President Barack Obama yesterday signed legislation cleared by U.S. lawmakers earlier this week that authorizes assistance to Ukraine and imposes sanctions on individuals responsible for violence or undermining Ukraine’s sovereignty.

Ukraine Optimism

The ruble fell on April 2 after Finance Minister Anton Siluanov said Russia will resume buying foreign exchange for one of its sovereign wealth funds “in days.”

The dollar-denominated RTS Index increased 1.9 percent to 1,233.93. The yield on ruble-denominated government debt due February 2027 fell 15 basis points to 8.86 percent, trimming its advance this year to 96 basis points.

“The ruble’s main driver over the past week was investor optimism regarding the developments of the Ukrainian crisis,” Dmitry Dudkin, head of fixed-income research at UralSib Capital in Moscow, said in e-mailed comments. “The OFZ market is recovering after a strong March drop.”

EPFR Global-tracked funds pulled $3.62 billion from Russian equities and bonds this year through April 2. The outflows have been approaching $6.1 billion pulled in all of 2013, the data show.

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