Bloomberg News

Russia Stocks Gain as Goldman Sees 28% ‘Upside’ by Year-End

April 23, 2010

Russian stocks advanced by their most in more than a week after Goldman Sachs Group Inc. said there’s 28 percent “upside potential” in the equity market this year and stock funds posted a 10th week of inflows.

OAO Magnitogorsk Iron & Steel and OAO Novolipetsk Steel jumped more than 3.5 percent after Goldman Sachs upgraded the stocks. OAO Gazprom, the country’s export gas monopoly, gained 2.3 percent. The ruble-based Micex Index added 1.7 percent to 1,467.62 at the close in Moscow, paring its weekly loss to 1.8 percent. The dollar-denominated MSCI Russia Index was up 1.9 percent at 865.59, snapping two days of losses, as of 7:38 p.m. in Moscow.

Russian stocks are “undervalued,” even after outperforming all other indexes last year and MSCI Russia more than doubled since the end of 2008, according to the Goldman report received today. Equity funds focused on Russia posted inflows of $106 million in the week ending April 21, according to fund tracker EPFR Global.

The MSCI Russia gauge is valued at 8 times estimated earnings, less than the 12.7 for the MSCI Emerging Markets Index of 22 countries. Oil for June delivery rose 0.6 percent to $84.16 a barrel at 10:49 a.m. on the New York Mercantile Exchange after sales of U.S. homes surged in March by the most in almost five days. Russia is the world’s largest energy supplier.

Rising oil prices, recovering domestic demand and a strengthening ruble mean “an upgrade cycle will kick in” after the first quarter, Goldman Sachs analysts Sergei Arsenyev and Victor Baybekov, said in a report e-mailed today.

The Russian currency weakened 0.2 percent to 29.2300 per dollar today. The ruble is up 0.8 percent this month, extending the first quarter’s 2.8 percent rally.

To contact the reporter on this story: Jason Corcoran at Jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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