Biggest Russia ETF Rallies as Oil Surge Lifts Energy Companies

Updated on
  • Market Vectors Russia ETF advances for fifth day in New York
  • Mechel extends five-day gain to 70% on debt restructuring

The biggest exchange-traded fund tracking Russian stocks gained for a fifth day as oil rallied to a five-week high, boosting the outlook for the energy companies that comprise 43 percent of its assets.

The Market Vectors Russia ETF rose 2.1 percent to $16.82 in New York, widening its five-day advance to 17 percent. OAO Mechel, the mining company seeking to avert bankruptcy, jumped after it agreed to a $1.9 billion debt restructuring. A gauge of the country’s American depositary receipts increased to a one-month high.

The Market Vectors ETF has jumped from a seven-month low on Aug. 24 as investor sentiment toward Russian equity assets improved in tandem with the rising price of oil, the country’s biggest export and a major source of government budget revenue. Brent crude surged 8.2 percent to $54.15 a barrel on Monday as OPEC said it’s ready to talk to other global producers to achieve “fair prices” and the U.S. reduced its output estimates, alleviating concern that a global oversupply will persist.

“Investors are looking for any signs that the supply glut will ease and oil prices will go up, and whenever any of these signs appear, the Russian market readily jumps,” Sergei Pigarev, an analyst at Rye, Man & Gor in Moscow, said by phone from Brest, Belarus on Monday. “We saw a Brent rebound in recent days, but the question is how long will it last?”

Investors have been withdrawing from Russia this year amid its first recession since 2009 as lower oil prices exacerbate the impact of sanctions linked to the Ukraine conflict including international financing restrictions and export bans. Gross domestic product has shrunk in each of the past two quarters and will probably contract about 3.7 percent this year, according to the median estimate of 48 economists surveyed by Bloomberg.

Brent crude fell to as low as $42.7 a barrel last week, the lowest since March 2009. Oil prices will rise to about $57 per barrel next year and $63 in 2017, Yaroslav Lissovolik, an analyst at Deutsche Bank AG in Moscow, said in a note. He earlier projected Brent at $70 per barrel in 2016 and $75 in 2018.

Mechel rose 5.6 percent to $1.14 in New York as the company agreed to a restructuring with Gazprombank JSC. The stock has gained 70 percent in the past five days.

RusHydro PJSC slid 6.3 percent to 76 cents in New York. Prime Minister Dmitry Medvedev endorsed Nikolay Shulginov of the Russian state power dispatcher System Operator to take over as head of the hydropower producer, replacing Chief Executive Officer Evgeny Dod.

The Bloomberg Russia-US Equity Index gained 1.1 percent to 51.36. Futures on the RTS Index expiring Sept. 15 added 2.1 percent to 84,440 in U.S. hours.