Russia’s Micex Gains as Magnit Outweighs EU Sanctions Concerns

Russian stocks rose, erasing earlier losses, as OAO Magnit and OAO Uralkali gained, outweighing concern the European Union may impose curbs on financing for state-owned lenders.

The Micex Index added 0.2 percent to 1,408.80 by the close in Moscow, having fallen as much as 0.9 percent. OAO Sberbank, Russia’s biggest lender, declined 0.8 percent and VTB Bank, the second-largest, lost 0.3 percent. Magnit jumped 1.2 percent after reporting yesterday second-quarter net gained 49 percent.

A ban on European purchases of bonds or shares sold by Russia’s state-owned banks is among options being weighed by the EU over Russia’s actions in Ukraine, according to a proposal presented to member states. Uralkali, the world’s biggest potash producer, climbed 2.7 percent. Potash Corp. of Saskatchewan Inc., the largest fertilizer producer by market value, raised its full-year earnings forecast and said Chinese demand for the crop nutrient will be more than previously expected.

“Strong results from Magnit yesterday helped today as well, strong results of Potash Corp. in the U.S. have helped Uralkali, which helped the index to close marginally up,” Rustam Mursalimov, a portfolio manager at Gazprombank Asset Management in Moscow, said by e-mail.

Since the July 17 downing of the Malaysian Airlines jet by a missile the U.S. says was probably supplied by the Russian military, sentiment toward Russian assets has soured. Norway’s $890 billion sovereign wealth fund, the world’s biggest, is reassessing its holdings.

Wealth Fund

The Norwegian wealth fund has 65 investments in Russia. Its largest holding is a 4.6 percent stake in VTB Bank worth $888 million, according to its 2013 annual report.

OAO Magnitogorsk Iron & Steel climbed 3.4 percent, the best performance on the index, after posting a 6.3 percent rise in second-quarter steel output.

Bonds, stocks and the ruble slumped on July 17 after the U.S. leveled new sanctions against Russian companies. About $47 billion was erased from the Micex’s market value last week, the most in four months, according to data compiled by Bloomberg.

Predictions the EU will follow the U.S. in imposing measures targeting Russian industries has increased, with 48 percent expecting the move, up from 4 percent in June, according to a Bloomberg survey. The survey was conducted July 18-23.

‘Harshest Punishment’

If the EU imposes capital constraints on VTB and Sberbank, “that would be the harshest punishment,” Renata Klita, an analyst at Blackfriars Asset Management Ltd., said by e-mail.

Putin will pull back if European sanctions are strong enough, Mark Mobius, executive chairman of Templeton Emerging Markets Group, said in an interview with Tom Keene on Bloomberg Television today. The market will recover in two years to three years so this is a good chance to invest if the price is right, he said.

AFK Sistema slumped 5.3 percent. The company said yesterday its Sistema-Invest unit has received a notice from the registrar about restrictions on transactions in its OAO Bashneft shares.

The Micex trades at 5.1 times estimated earnings, making it the cheapest measure among 21 emerging markets tracked by Bloomberg. That compares with a multiple of 5.3 at the end of February, before Russia’s incursion in Crimea. The dollar-denominated RTS Index retreated 0.4 percent to 1,266.72.

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