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. Last Updated: 07/27/2016

Stock Market Booms In Spite of Uncertainty

The stock market overcame political uncertainty and a fluctuating ruble to post one of its strongest weeks of the year, with The Moscow Times Index closing Friday just a shade off its post-Black Tuesday high.


The MT Index of 50 widely traded shares rose 8.54 points on the week to close at 153.43, with the dollar-adjusted prices jumping 5.59 points since last Friday to finish at 74.04. The index hit 153.56 last month, its highest level since just after the ruble crash last October, when it reached 166.77.


Analysts said the upswing is a sign of a maturing market due for long-term growth. This week's rally was broad-based, with advancers outpacing decliners by 34 to 13 in the ruble-based prices on the MT index, with 3 issues unchanged.


"A small boom is there," said Konstantin Melnikov, director of the Rinaco-Plus brokerage house. "There may be some backward movement but it seems that this is a sustainable trend."


This week's gains came in the face of the no-confidence motion in the government passed by the State Duma on Wednesday and continued uncertainty over the course of the ruble, which cooled down this week but still gained 98 points.


Thomas Reed, an analyst with AIOC Capital, said the no-confidence vote presented a buying opportunity to markets convinced that an overall upward trend would continue. "You get a blip" and then the rise resumes, he said.Other analysts said bigger gains are in store when the ruble stabilizes, noting that its current strength has contributed to stocks' rally.


"I think there's been a lot of trading this week because of the ruble," said Patti Kostuchuk, senior manager at Rye, Man & Gor Securities. "When the ruble went down you saw a lot of selling because a lot of purchasing is done in rubles."


Brokers say the stock market rally is being fueled by foreign investment as well as a broader menu of stocks.


Consequently, market activity today is of a different, more mature nature than the frantic buying and selling of last summer and fall, when foreign portfolio investment flooded into Russia at a rate of $500 million a month before tapering off sharply at the end of the year.


"The market has become much broader," said Melnikov. "It's not like 10 stocks are traded like last summer, now it's probably hundreds. Brokers are now chasing hundreds of different, less liquid stocks that no one could even think about last year."


Investment has begun to recover recently, reaching $200 million in May, up from $100 million in April and $85 million in March, First Deputy Prime Minister Anatoly Chubais said recently.


"The number of foreign players has been increasing recently," said Anton Lobanov, an analyst at the Skate-Press Consulting Agency. "Foreign investors returned to the Russian market about a month ago."


International fund managers -- who many say will ultimately drive a major stock market push -- are expected to sink more money into Russia soon.


Brokers said that Templeton International's Russia fund closed last week at $69 million -- far lower than company estimates of as high as $400 million -- and others that have been quietly testing the waters could soon move more aggressively onto the market.


Among the big winners this week were GAZ Auto Plant, which closed at 45,670 rubles ($10) up from 28,920 rubles last Friday. Lobanov attributed the rise particularly to a resurgence in machinery stocks after a stagnant winter and spring.


Losers included OLBI-Diplomat, which fell to 12,000 rubles from 14,000 rubles.