Press

Bloomberg 25.08.2014 Yuri Selyandin's commentary "Russia Stocks Advance Before Ukraine Talks as VTB Shares Climb"

Russia Stocks Advance Before Ukraine Talks as VTB Shares Climb
By Ksenia Galouchko Aug 25, 2014 12:12 PM GMT+0400

Russian stocks gained, paring the sharpest drop in more than two weeks, on wagers planned talks tomorrow between President Vladimir Putin and his Ukrainian counterpart will curb the chance of tougher sanctions.

The Micex Index (INDEXCF) rose 0.6 percent to 1,454.60 by 11:02 a.m. in Moscow, paring a 1 percent drop on Aug. 22. VTB Group climbed 1.5 percent after the government said it plans to buy shares of the nation’s second-biggest lender. OAO Aeroflot gained 1.8 percent after a report the nation’s biggest airline plans a new discount carrier.

Peace plans are “on the table” for tomorrow’s talks between Putin and Petro Poroshenko, German Chancellor Angela Merkel said Aug. 23 during her first visit to Kiev since separatist violence erupted this year. Russia, which Ukraine and its allies blame for stoking the unrest, denies it’s involved in the conflict that has triggered sanctions from the U.S. and Europe and kept Russian stock valuations at the lowest among developing markets.

“The Russian market’s attention is still focused on events in Ukraine,” Yuri Selyandin, a money manager who helps oversee about $2 billion at GHP Group in Moscow, said by phone. “Investors are hoping for the conflict’s de-escalation and all eyes are on tomorrow’s meeting.”

The Micex trades at 5.2 times estimated earnings, making it the cheapest among 21 emerging-market measures tracked by Bloomberg. That compares with a multiple of 5.3 at the end of February, before Russia’s incursion into Ukraine’s Crimea peninsula.
Buying Shares

The Finance Ministry said it will use 239 billion rubles ($6.6 billion) from the National Wellbeing Fund to buy shares in VTB and Russian Agricultural Bank, increasing the lenders’ capital.

Government support for VTB means the lender “will have no issues with capital adequacy to grow business,” Slava Smolyaninov, a strategist at UralSib Financial Corp., said in e-mailed comments.

Sanctions are intensifying Russia’s worst economic performance since the 2009 recession. Gross domestic product will probably grow 0.5 percent this year, according to the median estimate in a Bloomberg survey of analysts.

OAO Magnitogorsk Iron & Steel increased 1.9 percent to 7.49 rubles. The company posted a second-quarter profit of $159 million on Aug. 22, compared with a loss of $79 million in the first quarter.