The Moscow Exchange is accelerating plans to transition to two-day settlement of transactions as the bourse seeks to lure more foreign investors and bolster trading after its initial public offering.
Russia’s main stock and fixed-income exchange will move from the current system, where trades must be settled on execution, to the T+2 mode that is the norm in U.S., German and Brazilian markets by March 26 for some equities, spokesman Nikita Bekasov said by e-mail yesterday. The bourse, which raised $498 million in its Feb. 15 IPO, is modernizing its systems and opening up access as Russian equities trade at the cheapest level among 21 emerging markets tracked by Bloomberg.
“Clients will no longer have to pay their brokers to borrow stock and finance settlement to make their stock sales,” Luis Saenz, the head of equity sales at BCS Financial Group, said by e-mail from London yesterday. “Lower trading costs and higher post-trade transparency will bring more liquidity onto the local market.”
The Bloomberg Russia-US Equity Index (RUS14BN) stock gauge slid 1.1 percent to 100.64 yesterday, the lowest level since Jan. 11. Futures on Russia’s dollar-denominated RTS Index fell 1.3 percent to 154,390 in U.S. hours yesterday. The benchmark Micex Index (INDEXCF) added 0.5 percent yesterday in Moscow to 1,503.66.
The exchange will move its whole market to T+2 settlement in July, Bekasov said yesterday, without giving any details. The exchange is expected to introduce T+2 settlement in March for 20 of its most liquid stocks, Saenz said, citing unidentified sources at the exchange.
Shares of the exchange, created out of a merger between the Micex and the RTS, rose 0.6 percent to 54.75 rubles, or $1.80, in Moscow yesterday. The price represents a 0.5 percent slip from the IPO price of 55 rubles.
The Micex gauge, with six of the 10 biggest companies in the oil and natural gas sectors, has the cheapest valuation of the biggest emerging markets. Stocks on the index trade at an average multiple of 5.7 times estimated earnings, compared with 15.6 for India’s S&P BSE Sensex Index, 11.2 for Brazil’s Bovespa and 10 for China’s Shanghai Composite Index, according to data compiled by Bloomberg.
Sergey Sinkevich, the exchange’s head of primary markets at the time, said in November that the settlement reform was expected by end-2013. Russia merged its two competing depositories on Nov. 6 to bring settlement procedures into line with international norms as President Vladimir Putin seeks to turn Moscow into a financial hub.
Euroclear Bank SA, the world’s largest bond settlement system, began settling local bond transactions directly for foreigners on Feb. 7. It received approval from the country’s regulators to expand access to corporate and municipal debt and plans to begin those operations within months, after sorting out technical issues, Frederic Hannequart, Euroclear’s chairman, said in an interview in Moscow on Feb. 13.
Russia should speed up plans to make the country’s equities available for trading through banks including Euroclear to the start of 2014, six months earlier than planned, Finance Minister Anton Siluanov said this month. Barclays Plc estimates the changes will see foreigners increase Russian domestic government bond holdings by as much as $40 billion in 2013 to 2014.
Moscow ranked 64th on the Global Financial Centers Index in September, a survey compiled by Z/Yen Group, a London-based consulting firm. Earlier this month, the government has hired Goldman Sachs Group Inc. to burnish the nation’s image overseas and attract more institutional investors.
The Market Vectors Russia ETF (RSX:US), the biggest U.S. exchange- traded fund that holds Russian shares, sank 2 percent to $28.78 yesterday, dropping to the lowest level since Dec. 24. The RTS Volatility Index, which measures expected swings in the index futures, rose 0.4 percent to 19.98.
“Investors are far from being enthusiastic about Russia at the moment,” Andrey Tretelnikov, an analyst at Rye Man & Gor Securities, said by phone from Moscow yesterday. “They are cautious and they are nervous, so Russian equities decline as oil drops and European worries intensify.”
Oil for April delivery slumped 1.1 percent to $92.11 a barrel in New York yesterday as U.S. Secretary of State John Kerry signaled that a diplomatic solution to a standoff over Iran’s nuclear program is possible and as the euro reversed gains against the dollar.
Brent oil for April settlement dropped 0.6 percent to $114.44 a barrel on the London-based ICE Futures Europe exchange as partial election results in Italy heightened concern that the euro-zone debt crisis may deepen. Urals crude declined 1 percent to $110.89.
Polyus Gold International Ltd. (PGIL) fell 3.3 percent to $3.21, the lowest since Jan. 23. The stock was the biggest decliner on the Bloomberg Russia-14 gauge yesterday.
Yandex NV (YNDX:US), Russia’s biggest Internet company, rallied 2 percent to $24.08 yesterday and was the biggest gainer on the Russia-14 gauge. Trading volume exceeded the average for the past three months by 41 percent.
The ruble weakened 0.3 percent to 30.5070 per dollar in Moscow yesterday. The currency was steady at 34.7631 against the dollar-euro basket used by the central bank to minimize swings in the ruble that hurt exporters. Futures on the currency showed the ruble declining 0.8 percent to 30.623 per dollar yesterday.
United Co. Rusal, the world’s largest aluminum producer, lost 0.4 percent to HK$4.48 in Hong Kong trading as of 12 p.m. local time. The MSCI Asia Pacific Index fell 0.4 percent.
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