Russian Stocks Best In Europe
By Emma O’Brien and Laura Cochrane
Bloomberg
MOSCOW — Russia, the worst-performing major stock market in 2008, was Europe’s best last month as the ruble rose and reserves stabilized. Every neighboring market crumbled. The Micex equity index climbed 6.6 percent in February as the world’s second-biggest oil producer stopped speculators from driving down the ruble and depleting its $382 billion of foreign exchange reserves. In Ukraine, the central bank’s holdings fell 24 percent since August and the benchmark PFTS Index lost 21 percent last month. Latvia’s OMX Riga Index dropped 8 percent. While Russia’s government said the economy will contract for the first time in a decade and currency reserves are down 36 percent from August, the nation’s relative strength is raising Prime Minister Vladimir Putin’s influence over former Soviet states. Ukraine discussed borrowing $5 billion. Kazakhstan wants Russia to buy ailing BTA Bank. Belarus is asking for $3 billion in loans, on top of $2 billion granted last year. “Russia isn’t looking at a straight-line deterioration into oblivion,” said Kieran Curtis, who helps manage $800 million in emerging-market fixed-income assets in London at Aviva Investors Ltd. “It has enough liquid assets to take stakes in all kinds of things in the former Soviet states.” Last year, international investors fled Russia after its war with Georgia, a 54 percent decline in the price of Urals crude, and the global credit crisis sent the Micex down 67 percent. Speculators targeted the ruble, driving it 20 percent lower against the dollar and 19 percent versus the euro. Bank Rossii spent $216 billion to keep the currency’s seven-month drop from turning into a rout. Standard & Poor’s cut Russia’s credit rating in December by one level to BBB, the second-lowest investment-grade ranking. The government expects to run a budget deficit of about eight percent of gross domestic product this year. The central bank steadied the ruble, which gained 0.5 percent against the dollar last month, by pledging to raise interest rates and curtailing loans that banks were using to bet against the currency. Investors anticipate government plans to provide $200 billion in loans and reduce taxes will bolster the economy and push up the Micex, which is down 67 percent from its record high in May. The Micex fell 2.2 percent on Monday and the ruble dropped as much as 0.8 percent to its weakest level against the dollar in a week. Russia is “still better off than others, mostly because of the reserves,” said Beat Siegenthaler, chief emerging-markets strategist in London for TD Securities. Russia may be willing to draw on its reserves to prop up neighboring economies, said Ivan Tchakarov, an economist at Nomura Holdings Inc. in London. “Ukraine will require more than the $16 billion from the IMF, so they will need Russian money,” he said. “It’s the perfect time for Russia to flex its muscles.” “I welcome Russia’s efforts to try and create stronger economic linkages because for investors it’s stabilizing,” said Jerome Booth, head of research at Ashmore Investment Management Ltd. in London, which manages $36 billion of emerging-market assets. “It’s looking for relationships it wants to solidify in the region.”
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