Bloomberg News

Micex Rises Second Day on China Easing Optimism; Novatek Jumps

July 16, 2012

Russian stocks climbed to an almost week-high for a second day of gains as investors bet China will take further efforts to support growth, boosting appetite for riskier assets.

The benchmark Micex Index (INDEXCF) rose 0.4 percent to 1,422.03 by the close in Moscow, the highest level since July 10. OAO Magnitogorsk Iron & Steel rallied 1.9 percent before President Vladimir Putin’s visit to the company today. OAO Novatek, Russia’s second-biggest gas producer, rose 2.2 percent. OAO GMK Norilsk Nickel, Russia’s largest mining company, fell 1.1 percent as the metal declined in London.

While government measures to stabilize growth in China are “bearing fruit,” difficulties may persist, the official Xinhua News Agency cited Premier Wen Jiabao as saying yesterday. China’s State Council may this week give details of easing measures to support growth, Nomura Holdings Inc. analysts wrote in a note today.

“In order to reverse the Chinese slowdown, we need to see stronger easing measures, the Russian market is waiting for them,” Sergey Kucherenko, who manages about $30.6 million in Russian equities at Nomos Bank in Moscow, said by phone.

Russia equity funds posted their first week of inflows in 12 in the week ended July 11, attracting $51 million, according to EPFR Global data. The dollar-denominated RTS Index added 0.4 percent to 1,374.02, while the Russian Depositary (RDXUSD) Index of stock traded in London added 0.1 percent to 1,544.04.

“The Russian market is trying to find a definite direction,” Kucherenko said. “We may see another drop to this year’s low levels.”

X5 Declines

The Micex fell as much as 0.3 percent earlier. Stocks retreated as the 0.5 percent drop in June retail sales followed a 0.2 percent decrease the month before, Commerce Department figures showed today in Washington.

Crude oil, the nation’s main export earner, was little changed at $87.18. Oil and gas contribute about 50 percent of Russia’s state revenue.

“The Russian market is a prisoner of the external events, U.S. markets,” Slava Rabinovich, Moscow-based chief executive officer of Diamond Age Capital Advisors, which manages $180 million in Russian assets, said by phone. “We’re very dependent on energy exports, so any sign of a global slowdown reflects negatively on the Russian stocks.”

X5 Retail Group NV (FIVE), Russia’s largest food retailer by revenue, headed for an almost three-year retreat in London, dropping 2 percent to $20.75. Troika Dialog cut the stock to hold from buy after Chief Executive Officer Andrei Gusev left the company.

Russian industrial-production growth expanded 1.9 percent from a year earlier, compared with a 3.7 percent gain in May, the Federal Statistics Service in Moscow said today in an e- mailed statement.

Russia’s benchmark index, which has added 1.4 percent this year, trades at 5.2 times estimated earnings. That compares with 9.5 times projected earnings for the average company on the MSCI Emerging Market Index, which has gained 1.1 percent this year.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

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


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