Russia ETF Gains to One-Month High as Oil Boosts Energy Stocks

  • Brent crude rallies above $45 a barrel in London trading
  • GDP will probably grow 0.7% in 2016, economy minister says

Investors returned to the biggest exchange-traded fund tracking Russian stocks as Brent crude trading at about $45 per barrel lured them back to the cheapest equities in emerging markets.

Investors put $7.9 million in the Market Vectors Russia ETF on Friday after a $10.4 million inflow on Thursday, data compiled by Bloomberg show. The fund finished the session Monday little changed at $17.57 after gaining as much as 1.4 percent. The dollar-denominated RTS Index jumped to a four-month high.

Investors have been moving into the Market Vectors ETF, 44 percent of which is invested in energy stocks, amid signs that oil prices are stabilizing. Brent, which rose 0.4 percent to $44.83 a barrel Monday, has sold for an average $46.69 in the past month after recovering from a six-year low of around $43 in August. The economy shrank 4.1 percent in the third quarter after a 4.6 percent slump in the previous three months, suggesting that the lowest point of the contraction is behind, Economy Minister Alexei Ulyukayev said, spurring bets that the first recession since 2009 will be milder than projected.

Inflation, GDP

“Some investors see that the economy is showing first signs of stabilization and the decline in oil prices is more or less contained, and they are reviewing their underweight positions on the market and slowly starting to return to Russia,” Aleksei Belkin, chief investment officer at Kapital Asset Management LLC, who has been buying Russian assets since October, said by phone on Monday.

Inflation will slow in 2016 and gross domestic product will probably grow 0.7 percent, Ulyukaev said on Monday. There are signs Russia’s economy will stabilize, the International Monetary Fund said in a statement on Monday. The IMF predicts Russia’s GDP will contract 0.6 percent in 2016. The Micex Index trades at 6.3 times the projected 12-month earnings of its member stocks in Moscow, the lowest multiple among emerging-market equity benchmarks, data compiled by Bloomberg show.

Brent climbed for a fifth day as the Saudi Press Agency said the nation is ready to work with OPEC and non-OPEC members to stabilize the crude market. Saudi Arabia’s oil minister made similar comments last week.

The Bloomberg Russia-US Equity Index slipped 0.4 percent to 52.40. The RTS Index jumped 1 percent. Futures contracts on the RTS Index expiring in December slid 0.7 percent to 89,220 in U.S. hours.

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