Stocks finished the first quarter of 2010 ahead of where they started, having weathered a correction and subsequent rally, and are poised to continue their rise well into the second quarter, driven by high oil prices and good news from abroad.
The ruble-denominated MICEX Index finished off the quarter at 1450.15, up 5.9 percent from its Dec. 31 close, while the dollar-denominated RTS Index closed at 1572.48, having gained 8.9 percent in the same period.
Both indexes suffered a correction in the first part of the quarter as flagging prices for oil, Russia's main export, brought down stocks, which subsequently regained their buoyancy on the rising tide of oil. Crude started the year at about $80 per barrel and fell to about $70 before regaining its losses by the end of the quarter.
The indexes continued their upward trend through the first two days of April, with the RTS breaking through the 1,600 barrier to close the week at 1,614.45, its highest level since September 2008. The MICEX edged closer to the 1,500 mark, finishing the week at 1,480.17 — a 20-month high.
The numbers were helped by a U.S. Labor Department report Friday saying the United States witnessed a 162,000 increase in jobs last month, the largest jump in three years. ?
Russia-focused equity funds ending in March showed net inflows for seven consecutive weeks, as investors flock to the country to take advantage of expected profits once the economy's recovery takes hold.
More than $1.3 billion has flowed into Russia-focused funds throughout the first quarter, according to data from EPFR Global, putting Russia in first place among developing economies.
The performance of Russian equities has justified such flows, Chris Weafer, chief strategist at UralSib, said in a research note.
"Year to date, Russia is the best performing BRIC country," he said, referring to Brazil, Russia, India and China. "Partly that is due to the rising price of oil, partly it is because Russian equities are amongst the cheapest in the asset class, especially taking second half of 2010 and 2011 numbers, and partly it is because of the growing volume of new money coming to Russia funds."
That sentiment will likely continue to be felt well into the second quarter, analysts said, especially as crude is expected to hold its price or rise.
"The growth in oil prices will continue, and investors will continue to buy Russia securities accordingly," Mark Rubenstein, an analyst at Metropol, said in a note. "First and foremost, this concerns big institutional investors: Fund flows onto Russian markets from them will strengthen, following from the increased oil prices."
Equities in Russia are “mispriced” relative to the country’s bonds more than in any emerging market, and Russian stocks are set to outperform debt and other share indexes as earnings grow, JPMorgan Chase said Friday.
Russian stocks have underperformed bonds in the first quarter, with the MICEX Index gaining 5.9 percent in the first three months of 2010, compared with a return of 19 percent on sovereign bonds, according to JPMorgan’s EMBI+ Index. (Bloomberg)
The ruble gained for a fifth day against the dollar on Friday, the longest winning streak in seven months, and advanced against the Central Bank’s target basket to the strongest position since December 2008 as oil traded at a 17-month high.
The Russian currency added 0.4 percent to 29.22 per dollar in Moscow trading, bringing its gain on the week to 1.4 percent. The ruble gained 0.4 percent to 39.51 versus the euro, leaving it at 33.85 against the euro-dollar basket, the highest since Dec. 23, 2008. (Bloomberg)
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