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Russian Stocks Rise to 3-Week High as Credit Suisse Lured Back

Updated on
  • Stocks trading at cheapest level since 1998 `money in pocket'
  • Sberbank's 14% advance this year may mean limited gains: BCS

Russian stocks climbed to the strongest level in almost three weeks as the ruble’s oil-driven rebound lifted Sberbank PJSC toward a record high, and analysts at Credit Suisse Group AG recommended switching out of Mexico into Russia.

Sberbank, Russia’s biggest bank, led the Micex Index 1.5 percent higher to 1,905.32 by 4 p.m. in Moscow. The lender, which holds almost half of all household deposits in Russia, has a 13.5 weighting in the Micex, the second biggest in the 50-stock gauge. The ruble climbed for a second day, appreciating 0.6 percent to 66.7400 versus the dollar, the strongest level since Dec. 1 on a closing basis.

Investors are being lured to Russian stocks trading near the cheapest level since the 1998 crisis, at a price-to-book multiple that represents a 53 percent discount to MSCI Emerging Markets Index. Credit Suisse analysts said they were raising their outlook on Russia from a "deep underweight stance” and advised investors switch into Russian equities and out of Mexican stocks.

“Undervalued equities are like having money in the pocket,” said Anna Vaananen, a money manager at Credit Suisse Asset Management in Zurich. She increased her allocation to beaten-up Russian stocks such as Internet search engine Yandex NV and London-listed rail-freight operator Globaltrans Investment Plc during a selloff at the start of the year.

Worst Over

A rebound in oil prices has stabilized the ruble and helping the central bank tackle double-digit inflation and will pave the way for interest rate cuts which will stimulate growth, Vaananen said. Brent crude’s six percent surge on Friday lifted energy producers, which account for more than half of the stock market.

"We believe the worst of the macroeconomic deceleration is behind us," said Credit Suisse analysts Alexander Redman and Arun Sai.

Rosneft OJSC overtook Gazprom PJSC as Russia’s most valuable company for the first time in a decade. Shares in Rosneft rose 4.5 percent in London, boosting the value of the oil producer to $52 billion, compared with Gazprom’s $51 billion capitalization.

Sberbank reported a first-quarter quadrupling of net profit under Russian accounting standards on Thursday as the ruble gained and non-performing loans declined. While the index has added 7.5 percent since the beginning of the year, Sberbank has advanced almost 14 percent. The shares trade at 8.4 times forecast earnings, compared with 7.7 times for the Micex, data compiled by Bloomberg show.

“It doesn’t look cheap,” Olga Naydenova, a banking analyst at BCS Financial Group who rates Sberbank at hold, said by e-mail.

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