Bloomberg News

Russia’s Micex Index Snaps Six-Day Losing Streak on Oil, Iran

March 23, 2012

Russian stocks snapped their worst losing streak since August as oil, the country’s main export revenue earner, rallied after Reuters reported Iranian crude exports will drop because of tighter sanctions.

The 30-stock Micex Index (INDEXCF) added 0.8 percent to 1,540.97 by the close in Moscow, paring its weekly slide to 4.8 percent. Oil producer OAO Tatneft rose 1.9 percent. OAO Sberbank, Russia’s largest lender, added 1.6 percent, while OAO Aeroflot, the nation’s biggest airline, gained 2.6 percent. The Russian Depositary Index (RDXUSD) of London-traded stocks increased 0.9 percent to 1,822.28.

Russian shares had their biggest weekly drop since December as reports yesterday showed manufacturing contracted in Europe and China. The Micex rebounded today after Reuters reported Iranian oil exports will drop by 300,000 barrels a day because of tighter sanctions and as computer buy orders were triggered.

“The renewed focus on economic growth prospects has resulted in some hesitation in the advance of equity markets after a strong rally since mid-December,” Neil MacKinnon, global macro strategist at VTB Capital, wrote in e-mailed comments today.

While Urals crude climbed 0.6 percent to $120.47 today, Russia’s main export earner, is down 2.1 percent in the week. Oil and natural gas account for about 50 percent of state revenue and 17 percent of gross domestic product.

The ratio of outstanding puts to sell the Market Vectors Russia exchange-traded fund, a U.S.-listed ETF that holds Russian shares, versus calls to buy rose to 2.02-to-1 yesterday, the highest since July 2010, data compiled by Bloomberg show.

Commodity ‘Fear’

“The fear of what could happen to the commodity prices if China really began to slow down, which would clearly be a downside risk to the Russian markets, is why people are buying puts,” Roland Nash, chief investment strategist at Verno Capital in Moscow, which manages $200 million in assets, said by phone yesterday. We could see a “10 to 15 percent retreat in the RTS over the next four weeks, assuming we get more news about the global slowdown.”

The RTS added 0.9 percent to 1,668.41, its first increase in six days, according to data compiled by Bloomberg. The Bloomberg Russia-US Equity Index (RUS14BN) of Russian companies listed in New York slipped 1.9 percent to 106.42 yesterday. The RTS Volatility Index (RTSVX), which measures expected swings in the index futures, slid 8.2 percent to 30.61.

Russia-focussed equity funds attracted $131 million in the week to March 21, up from $58 million in the previous week, according to Troika Dialog, which cited EPFR Global data.

Adding Money

“The Russia sell-off is overdone,” Chris Weafer, chief strategist at Troika Dialog in Moscow, wrote in an e-mailed report today. “The fact that retail investors have continued to add more money to Russian equities despite the steep fall in equity values shows that those price declines have been overdone and mainly driven by traders.”

The Micex trades at 6 times analysts’ earnings estimates for member companies. Brazil’s Bovespa index, which is valued at 10.9 times estimated earnings, has jumped 16 percent this year, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 9.8 times estimated earnings, and the BSE India Sensitive Index has a ratio of 15.3.

-- Editors: Alex Nicholson, Linda Shen

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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