Russian ADRs Rise as Investors Settle Down From Days of Frenzy

Updated on
  • Brent prices may rise to up to $60 in 2016, Veles Capital says
  • Russia relies on oil and gas for about half its budget revenue

Russian stocks in New York advanced for the second time in nine days as investors took a pause from this week’s market anxiety and drew comfort from a brief rebound in oil.

The Bloomberg Russia-US Equity Index advanced 1.8 percent to 46.88 in New York, taking cues from U.S. stocks, which rallied the most since 2011 as concern over the knock-on effects of China’s surprise currency devaluation began to recede.

American depositary receipts of OAO Surgutneftegas added the most in a month, OAO Mechel soared 6.7 percent. The world’s biggest natural-gas producer Gazprom PJSC advanced 2.8 percent. Brent crude, which was up as much as 1.3 percent during the day, slid 0.2 percent to settle at $43.14 per barrel.

The steepest selloff in Chinese stocks since 1996 has some economists pushing back their forecasts for an increase in U.S. interest rates. That might bolster demand for riskier assets in countries such as Russia, which relies on oil and gas for half of its government revenue.

“There is some optimism that the rout in global equities is easing, and this positive sentiment spilled over to Russian equities,” Ivan Manaenko, head of research at Veles Capital LLC in Moscow, said by phone on Wednesday. “There is some feeling of relief among investors that the dust is settling.”

Global Selloff

About $8 trillion has been erased from the value of global equities since China’s surprise devaluation of the yuan on Aug. 11 as investors weighed prospects for slowing growth and the first rate increase in the U.S. in almost a decade. The rout ripped through emerging markets including Russia, which is mired in its first recession since 2009 and battered by oil prices trading at about half the five-year average.

“The longer Brent trades at below $45, the higher the chances are that it will return to up to $60 per barrel, which in turn will support Russian stocks,” Manaenko said. Oil prices may reach to $60 per barrel as soon as early 2016, he said.

Gross domestic product will shrink 3.3 percent this year before rebounding as much as 2 percent in 2016, Economy Minister Alexei Ulyukayev said Tuesday in Kuala Lumpur, Interfax reported. The ministry had earlier projected a 2.8 percent contraction followed by 2.3 percent growth.

The ruble dropped less than 0.1 percent to 68.9010 per dollar. The currency has lost 11 percent against the greenback this month, the second-biggest drop among currencies in the emerging market.

Surgut rose to 5 percent to $4.85 in New York. Mechel advanced to 79 cents. Gazprom increased to $4.09. The Market Vectors Russia ETF, the biggest exchange-traded fund tracking Russian stocks, rose 3.8 percent, the most since June, to $15.22. Futures on the RTS Index expiring in September added 1.5 percent to 76,500 in U.S. hours. United Co. Rusal declined 4.7 percent to HK$3.23 at 10:35 a.m. in Hong Kong.