Russian stocks gain on US bailout hopes
MOSCOW --Russian stocks surged back into positive territory Tuesday as U.S. President Bush redoubled efforts to push a $700 billion bailout package through Congress.
Russian federal regulators had earlier suspended trading for two hours within 15 minutes of opening after U.S. lawmakers' rejection of the bailout plan triggered major declines in the U.S. and Asia.
The MICEX -- where most trading in Russia takes place -- lost nearly 7 percent in early afternoon after the suspension on trading was lifted. But as Bush appealed to Congress to avoid the devastating economic consequences he said a rejection of the plan would bring about, Russian stocks recovered to post a gain by the day's end. MICEX closed up 0.8 percent to 1,027.7 points after trading was extended to 6:45 p.m. local time.
"People are thinking that the obvious outcome is so dire, that (the U.S. government) will go back and do a 'do-over,'" said Ron Smith, strategist at Alfa Bank. "And that's prompting some optimism."
The dollar-denominated RTS -- which first opened for trading at 12:30 p.m. -- closed up 1.5 percent at 1,211.8 points.
Renewed problems on Wall Street and sliding oil prices pushed Russia's stock markets into their steepest decline in a decade earlier this month, resulting in a two-day shutdown of trading. The stock market rout contributed to a collapse in confidence among lenders, pushing the government into action. It has poured billions of dollars already into the banking and financial systems in an effort to ease liquidity concerns after banks stopped lending to one another. It has also promised billions more in additional relief.
While investors say the packages have helped fend off panic, Russian markets have seesawed along with global indexes and volatile oil prices in recent days.
"In an environment of tight global liquidity, Russia belongs to the countries that's most susceptible to market volatility because Russian corporates have been very active in international borrowing," said Ralph Sueppel, head of economics and strategy at London-based Bluecrest Capital, which has $2 billion invested in emerging markets.
On MICEX, state-owned oil major Rosneft recouped earlier losses to close down 2.3 percent as oil prices dropped below $100 a barrel. Mining company Norilsk Nickel lost 1.2 percent. Sberbank, Russia's largest state-owned lender, soared by 10.5 percent, while state-controlled VTB bank posted a more modest gain of 2.2 percent.
Gazprom rose by 2.4 percent in the wake of its board meeting, where the gas export monopoly said it would use its own funds to repay and refinance the majority of its loans from 2007, enabling it to partially avoid the sting of high refinancing costs. Gazprom is Russia's biggest corporate borrower with 1.5 trillion rubles ($60 billion) of debt as of the end of 2007.
The company said also that it expects to receive additional licenses without auction in Russia's Far East before the end of the year. The licenses would help position Gazprom -- which supplies a quarter of Europe's gas needs -- as a key energy supplier to Asia.
Russia's stock market, which earlier this year was one of the world's most robust and lucrative, has been in a steep decline for weeks, reflecting not only the turmoil in international markets but also fears sparked by high-profile corporate conflicts and Prime Minister Vladimir Putin's public assault on Mechel, a steelmaker, for alleged price fixing. Russia's war with Georgia in August was for many investors the last straw, prompting roughly $7 billion in net capital outflow in just two days.
"Globally, investors are running from risk," said Chris Weafer, chief strategist at Moscow-based UralSib bank. "With the price of crude crashing back ... plus worries about the outlook for stability within the country's financial system, Russia is firmly in that category." 