(Bloomberg) --
It has taken five years but Russian stocks have sprung back to levels they traded in 2014 before a meltdown sparked by U.S. sanctions, oil-price collapse and a rocky float of the ruble had erased half of their .
The RTS Index, a dollar-denominated equivalent of the benchmark MOEX Russia Index, rose 0.8% on Monday after closing at the highest level since July 2014 on Friday. That took the gauge’s gains this year to 25%, cementing the world’s second-best performance after Greece’s benchmark and boosting the combined market capitalization of Russian stocks to $657 billion.
Emerging-market investors are returning to Russia as the country’s financial stability, currency strength and cheap equity valuations provide refuge from assets vulnerable to trade tensions and a global-growth slowdown. Concern over fresh U.S. sanctions have ebbed and a boost to dividend payouts by state-owned companies has proved irresistible.
“The absence of new sanctions has been a major driver for the Russian ruble and bonds and that has triggered a revaluing of equities,” Elena Loven, Portfolio Manager at Swedbank Robur Fonder AB, said by phone.
Gazprom’s higher dividends also boosted the index, she said: “Gazprom is one of the largest stocks under rerating that put the focus on Russian stocks again.”
The RTS Index plummeted 45% in 2014 when Russia’s annexation of Crimea incurred the wrath of Western powers, which imposed crippling economic sanctions. Brent crude’s 49 percent plunge in the second half of that year and the free float of the ruble sparked a sell-off in the country’s assets, arrested only by an emergency rate hike in December.
In contrast, 2019 has been the best year in a decade for Russian stocks. The RTS index’s gains are more than five times the 4.5% advance for the MSCI Emerging Markets Index. Analysts are disregarding the fluctuations in oil price: they have boosted their dollar estimates for Russian corporate earnings to the highest since 2014.
©2019 Bloomberg L.P.
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