Bloomberg News

Russia Stocks Enter Bull Market on Europe Debt Plan Optimism

October 27, 2011

Oct. 27 (Bloomberg) -- Russian stocks climbed, entering a so-called bull market, as commodity prices rallied after European leaders agreed on measures to tame the sovereign debt crisis.

OAO Transneft and OAO Gazprom added 4.9 percent and 4.6 percent, respectively. VTB Group, the country’s second-biggest bank, advanced 2.2 percent. Those movements helped send the 30- stock Micex Index 1.7 percent higher to 1,525.52 at the close in Moscow. That extended its gain from an Oct. 5 low beyond the 20 percent threshold some analysts say marks a bull market. The dollar-denominated RTS Index increased 4.1 percent to 1,592.93.

Oil for December delivery rose as much as 3.9 percent to $93.73 a barrel in New York after officials in Europe persuaded bondholders to take 50 percent losses on Greek debt and boosted a bailout fund to 1 trillion euros ($1.4 trillion). Russia relies on oil and gas for as much as 40 percent of its budget revenue.

“Banks and metals especially are enjoying a short-term knee-jerk reaction from the news about Greece,” Peter Westin, chief strategist at Aton Capital in Moscow, said by phone. “Investors will now be concerned about what comes next, whether other countries will come knocking and looking for haircuts on their debt.”

Severstal, Rosneft

Shares of coal miner OAO Raspadskaya jumped 6 percent, the biggest move on the Micex today, to 103.69 rubles. The country’s gas export monopoly OAO Gazprom climbed to 185.54 rubles. OAO Rosneft, Russia’s largest oil company, rose 3.3 percent to 221.91 rubles, its highest close since Sept. 8.

The ruble gained 2.5 percent to 29.95 against the dollar, its biggest increase since January 2010. OAO Sberbank, the largest holder of ruble deposits, rose 2 percent to 85.30 rubles, the highest since Sept. 8.

Concern Europe’s debt crisis will hobble the global recovery pushed the Micex down 32 percent from this year’s high on April 6 to its low in October. The gauge traded at 4.7 times estimated earnings on Oct. 9, the weakest valuation since February 2009.

The measure has pared its loss this year to 9.6 percent and currently trades at an average 5.4 times forecast earnings. That compares with a 15 percent slide for Brazil’s Bovespa index, which trades at 10.5 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 11.3 times estimated earnings and the BSE India Sensitive Index has a ratio of 14.7.

--With assistance from Jason Corcoran in Moscow. Editors: Alex Nicholson, Linda Shen

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

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


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