May 20, 2014, 12:00 AM

The market forgot about Ukraine

The Russian stock market recovered from the decline caused by the crisis in Ukraine. But experts are not yet sure that growth will be sustainable Yulia Orlova Maxim Stulov / Vedomosti

On Monday, the Russian stock market returned to pre-crisis February levels. At the end of trading, the MICEX index rose by 1.55% to 1,413.85 points, the RTS - by 2.22% to 1,289.98 points. Both indices were last higher at the close of trading on Friday, February 28th. On Monday, March 3, the decline began after the Federation Council allowed President Vladimir Putin to send troops into the territory of foreign countries over the weekend. On March 3, the RTS index lost 12%, the MICEX - 10%. Experts called this day Black Monday. In the last two months, although Russian stock quotes have been corrected, they have not reached February levels.

Yesterday, the growth leaders were shares of Rostelecom, which added 3.83%, M.video - 3.26%, Rosseti - 3.17%, Sberbank - 3.06% and Dixy - 2.79% . The cost of a barrel of Brent exceeded $110. Alrosa shares declined against the market - 3.81% and UC Rusal receipts - 2.14%.

“The market has abstracted itself from the situation in Ukraine. Investors’ attention has switched to China, where the Russian delegation is going,” explains VTB Capital trader Pavel Zinoviev for yesterday’s rise in shares. The only reason is Vladimir Putin’s trip to China, where agreements are expected to compensate for the negative impact of the Ukrainian crisis on the Russian economy, agrees Oleg Popov, portfolio manager at Allianz Investments.

Both experts say that the main driver of growth in the Russian market is Gazprom shares (2.61% per day), which, due to their large share in the index, strongly influence the stock market as a whole. Since the beginning of May, these securities have grown by 14%. The market expects the signing of a 30-year gas contract with China during President Putin's official visit to this country scheduled for May 20, experts indicate. “There are constant requests for the purchase of shares from both local and Western investors, and serious money has also begun to come in from long-term investors,” says Zinoviev.

At the same time, managing director of Schildershoven Finance Pavel Dushin notes that the bond market has not yet returned to pre-crisis levels. An increase in prices is still possible here. But Dushin expects a correction on the stock market: “At the first negative news, we will face a sharp decline.” “Most likely, the positive trend in the market is short-term,” agrees Popov. “Uncertainty remains in the Russian market, and the current growth could quickly give way to a decline,” agrees Vladimir Bragin, director for analysis of financial markets and macroeconomics at Alfa Capital Management Company.