Micex Gains as Morgan Stanley Lifts Stocks: Russia Reality Check

As markets react in real time to Russia’s incursion into Crimea and the annexation of the Black Sea peninsula, stocks advanced after Morgan Stanley forecast more equity gains if Petro Poroshenko’s election eases tension.

The Micex Index jumped 1.5 percent to 1,447.39, giving it a 0.2 percent gain since President Vladimir Putin’s intervention in Ukraine started on March 1. Morgan Stanley analysts reiterated the equivalent of a buy recommendation first issued May 8. Poroshenko’s win is an “important step” toward de-escalation in Ukraine and Russian stocks will rise as further steps are made to resolve tension, they said in a note.

The chart shows the performance of stocks, bonds and the ruble, along with indicators of Russian investment risk. The yield on benchmark local-currency bonds due February 2027 fell eight basis points today to 8.79 percent, leaving it 43 basis points higher since Feb. 28. The ruble weakened 0.3 percent to 34.6700 versus the dollar, a gain of 3.5 percent in the period.

The top panel displays the value of the Micex Index of 50 Russian equities, government debt in the Bloomberg Russia Local Sovereign Bond Index, and the ruble relative to the dollar. Credit default swap rates on Russian bonds due in five years appear in the bottom panel. The yield gap between Russian debt and U.S. Treasuries and the one-month implied volatility of the ruble are also tracked.

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