Ruble rallies as Putin eases crisis

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RussianRubleFlirk Flickr: Bob Marquart. Russian 10 ruble note.

Moscow - The ruble gained for a sixth day and stocks rose after President Vladimir Putin said Russia will work with the winner of Ukraine’s presidential vote, easing concern a standoff between the two nations will lead to wider sanctions.

The ruble strengthened 0.6 percent to 39.7295 against the cental bank’s target dollar-euro basket, taking this week’s appreciation to 2.1 percent.

The Micex Index rose 0.4 percent to 1,436.75 by 6:19 p.m. in Moscow, extending its fourth weekly gain to 3.2 percent.

The yield on local-currency debt due February 2027 declined seven basis points to 8.78 percent.

Concilliatory steps by Putin over Ukraine have offset concern continuing separatist violence in the country’s east will lead to tougher US and European penalties, buoying a rally in Russian assets.

Russia will work with the president voted in on May 25, even though the poll won’t meet international standards, Putin told an international audience in his keynote address at the St. Petersburg International Economic Forum.

“Putin’s comments have a positive effect on the market,” Sergey Vakhrameev, an analyst in Moscow at AnkorInvest, said by phone today.

“If the tensions in Ukraine are resolved after the elections, that’ll help.”

Russian stocks trade at 5.2 times estimated 12-month earnings, the cheapest among 21 emerging-country gauges tracked by Bloomberg, even after a 16 percent advance from this year’s low on March 14.

 

‘Rising Trend’

 

Ukraine’s billionaire chocolate magnate Petro Poroshenko is regarded as the front-runner to win the presidential poll as fighting continues in the south and east of the country.

Poroshenko, who leads a field of 21 candidates, says he’ll unite the nation by bolstering democracy and sealing deeper European ties.

“Unless something dramatic happens in Ukraine over the weekend, the Russian market might continue,” Kirill Yankovskiy, director for equity sales at UralSib Capital, said in e-mailed comments.

The “rising trend” on the market was “triggered by the de-escalation of the Ukraine situation and the extreme cheapness of Russian stocks,” he said.

Out of 50 Micex stocks, 92 percent traded above the 50-day moving average yesterday, the highest proportion since September 2012, according to data compiled by Bloomberg, signaling to some analysts that shares may extend gains.

OAO TMK, which could benefit from pipeline orders after OAO Gazprom signed a $400 billion supply deal with China this week, led the increase with a 5.8 percent jump.

OAO Sberbank, the nation’s biggest lender, climbed 2 percent.

 

Yields Fall

 

The ruble and government bonds, known as OFZs, will rally further if elections “pass smoothly and tensions recede,” Morgan Stanley analysts led by Rashique Rahman said in an e-mailed note.

The yield on the 2027 ruble bonds has dropped 69 basis points this month, while the ruble appreciated 4.3 percent versus the dollar, the most among 24 emerging-market currencies tracked by Bloomberg.

“Should Russia endorse the outcome of the polls, then the risk premium in the belly of the curve in particular could continue to diminish, as investors reduce their underweight position in OFZs,” they said. - Bloomberg News



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