Micex Rallies With Bonds as U.S. Sanctions Omit Biggest LendersKsenia Galouchko and Vladimir Kuznetsov
Russian stocks rallied from a six-week low, while bonds and the ruble rose as the nation’s largest banks avoided U.S. sanctions. OAO Rosneft dropped as the Obama administration imposed penalties on its chief executive officer.
The Micex Index snapped five days of declines to close 1.5 percent higher at 1,299.13 as OAO Sberbank jumped 5 percent. Rosneft, the world’s biggest publicly traded oil company, decreased to a 10-month low as CEO Igor Sechin was named on the sanctions list. The ruble added 0.3 percent to 35.9150 per dollar at 7:22 p.m. in Moscow. Yields on Russia’s local-currency debt due February 2027 fell six basis points to 9.59 percent, the first decline in six days.
The U.S. sanctions list comprised seven Russian officials and 17 companies that didn’t include OAO Gazprombank or state-development bank Vnesheconombank as some investors speculated. The European Union added 15 names to its sanctions list as part of an effort by the U.S. and its allies to punish Russia for escalating the crisis in Ukraine.
“We did not get major banks sanctioned, which was the biggest risk,” Luis Saenz, head of equity sales and trading at BCS, said by e-mail today. “On the flip side, we did get Sechin on the list which opens the door for lots of future complications.”
Penalties will be imposed on banks including InvestCapitalBank and SMP Bank, the U.S. said, also naming Sechin and Sergey Chemezov, head of Russian Technologies, to the list.
Of the Micex’s 50 members, 34 closed higher today. VTB Group gained 2.5 percent to 3.825 kopeks per share. The country’s stock index has suffered the world’s worst losses this year as Putin annexed Ukraine’s Crimea peninsula, prompting the worst standoff with the U.S. and its allies since the collapse of the Soviet Union.
Shares on the index trade at 4.7 times projected 12-month earnings. Mark Mobius, who oversees about $50 billion as executive chairman of Templeton Emerging Markets, said today that some stocks in Russia were trading at a bargain.
The ruble’s first advance in three days trimmed this year’s drop against the dollar to 8.5 percent, the most among 24 developing-country currencies after Argentina’s peso.
Russia’s 2027 bonds traded at a record low before recovering following the sanctions announcement. Yields on the debt jumped 65 basis points last week, the most since mid-March.
Russian assets slid last week as Standard & Poor’s lowered Russia’s credit rating to BBB- and the central bank raised its key interest rate by 50 basis points to 7.5 percent to damp inflation.
The seizure of international inspectors by pro-Russian separatists last week raised the stakes in the crisis after Russia began military exercises on Ukraine’s border, where the North Atlantic Treaty Organization says Putin has massed about 40,000 troops.
If the U.S. sees “further Russian aggression” toward Ukraine, it could impose sanctions on specific parts of the economy such as the banking and defense industries, U.S. President Barack Obama said today.
“Russia has done nothing to meet its Geneva commitments and in fact has further escalated the crisis,” the White House said in an e-mailed statement.
Rosneft shares fell 1.7 percent to 219.80 rubles, the lowest level since June 19. The company’s global depositary receipts declined 1.8 percent in London, set for the lowest level since September 2012, on volume 36 percent above the three-month daily average.
Shares of BP Plc lost as much as 1.9 percent in London, the most since March 20. BP holds a 19.75 percent stake in Rosneft and its CEO, Bob Dudley, has a seat on the oil company’s board.
“This is an unpleasant signal,” Alexei Kokin, an analyst at UralSib Financial Corp., said by phone. “It’s pretty unpleasant when the CEO of the biggest oil company is placed on such a list. It’s really important to find out whether the company itself will be sanctioned in the future.”