Bloomberg News

Russian Stocks Rise to 7-Week High as Oil Jumps on Fed’s Pledge

January 26, 2012

Jan. 26 (Bloomberg) -- Russian stocks advanced to their highest level in more than seven weeks after the Federal Reserve’s pledge to keep interest rates low boosted commodities.

The 30-stock Micex Index added 1.1 percent to 1,514.72 by the close in Moscow, its strongest since Dec. 5. VTB Group, Russia’s second-largest bank, jumped 5.4 percent. United Co. Rusal, the world’s biggest aluminum company, and OAO Mechel, Russia’s largest producer of coal for steelmaking, surged 4.2 percent and 6.2 percent, respectively. The dollar-denominated RTS Index gained 2.5 percent to 1,573.04, its highest level since Nov. 8.

Crude, Russia’s biggest export earner, gained and copper and nickel prices advanced after the Fed said it will keep U.S. rates “exceptionally low” until at least 2014 to bolster the world’s largest economy and biggest oil consumer. Energy sales contributed almost 50 percent of Russian government revenue last year and commodity-related companies make up four of the top five biggest stocks on the Bloomberg Russia-US 14 index.

“The Fed’s decision is being cheered by markets and accompanied by a weakening dollar,” Slava Smolyaninov and Leonid Slipchenko, analysts at UralSib Capital in Moscow, wrote in a research note today. “We see a very good short-term buying opportunity in Russian equities, and expect them to outperform.”

The Micex has gained 8 percent this year and trades at 5.8 times analysts’ earnings estimates for member companies. That compares with a 12 percent gain in 2012 for Brazil’s Bovespa index, which trades at 10.1 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 9.5 times estimated earnings, and the BSE India Sensitive Index has a ratio of 15.1.

Oil Climbs

Russian depositary receipts of Rusal jumped to 235.49 rubles, their highest close since Nov. 18. Novolipetsk Steel, Russian billionaire Vladimir Lisin’s steelmaker, added 2.3 percent to 74.04 rubles. Mechel, Russia’s largest producer of coal for steel making, rose to 353 rubles.

Oil climbed on prospects that the Fed’s commitment to holding rates low for at least two years may bolster growth and cut unemployment in the U.S., boosting fuel demand. Crude for March delivery increased as much as 2 percent to $101.39 a barrel in New York while Brent oil rose 1.9 percent to $111.89 in London.

OAO Rosneft, Russia’s biggest oil company, added 0.8 percent to 228.64 rubles.

OAO Sberbank, Russia’s biggest lender, advanced 3.7 percent to 90.31 rubles, its highest level since August, as the ruble strengthened against the dollar for a ninth day. A stronger ruble discourages Russians from withdrawing and converting ruble deposits, Sberbank’s main source of funding.

With assistance from Jason Corcoran in Moscow. Editors: Ash Kumar, Peter Branton

--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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