Yandex Leads Advance as Ukraine Concern Eases: Russia Overnight

May 09, 2014 12:59 am ET

(See EXT2 for more on the Ukraine crisis.)

May 9 (Bloomberg) -- Russian stocks trading in New York gained for a fourth day, led by search engine company Yandex NV, as President Vladimir Putin’s pledge to pull troops back from Ukraine’s border damped concern the dispute will escalate.

The Bloomberg index of the most-traded Russian stocks in the U.S. added 0.4 percent to 83.80, a three-week high. The advance trimmed the gauge’s 2014 decline to 18 percent. Yandex rose 2.1 percent in its fourth day of gains while television operator CTC Media Inc. climbed for a third day.

While Putin said yesterday that Russia was testing its army’s combat readiness, investors kept bidding up equities on speculation that his call the day before to pull back troops signaled he’s looking to ease tension with Ukraine. Pro-Russian separatists vowed to press ahead with autonomy votes in eastern Ukraine scheduled for May 11. The Russian market is closed for a national holiday today and reopens on May 12.

“There were conflicting signals and yet the market has got a firm sense that there will be no war in Ukraine following President Putin’s statements” on May 7, Konstantin Chernyshev, the head of research at UralSib Capital in Moscow, said by phone yesterday. “Those investors who wanted exposure to Russia focused on the companies that still generate money even as the economy is slowing.”

Russia has massed about 40,000 troops along the Ukrainian border, according to the North Atlantic Treaty Organization. The government in Kiev and its U.S. and European allies accuse Russia of fomenting separatist unrest in eastern Ukraine.

2008 Lows

The U.S. and the European Union have imposed sanctions on Russian companies and individuals, and threatened to tighten them if Putin doesn’t end his support for the separatists. The EU agreed on May 7 to expand the legal basis for sanctions, and foreign ministers will discuss adding more names to the blacklist next week, an EU official said.

“We are far from a resolution of the conflict and the market may test the lows of 2008,” Matthias Kuhlmey, partner and head of global investment solutions at HighTower Advisors, which has over $20 billion in assets, said by phone. He doesn’t hold Russian equities. “I expect a lot of volatility in the Russian market and I want to keep my clients away from it.”

Yandex climbed to a two-week high of $27.84 while CTC rose 1.7 percent to $9.49.

Futures on the RTS Index slipped 0.2 percent to 120,350 in U.S. hours. The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund that holds Russian shares, was little changed at $23.91 and the RTS Volatility Index, which measures expected swings in futures, also ended little changed at 31.24. United Co. Rusal, a Moscow-based aluminum producer, fell 1.4 percent to HK$3.42 in Hong Kong as of 12:57 p.m. local time.

Russia’s $2 trillion economy is already in a recession, according to the International Monetary Fund. The IMF cut the country’s economic forecast for the second time in less than a month last week, predicting full-year growth will slow to 0.2 percent from 1.3 percent last year.