The largest gains in Russia's actions in comparison with bond yields

The largest gains in Russia's actions in comparison with bond yields are encouraging more entries from venture capital fund in a year when the stakes rise in the price of raw materials will help extend the best rally among major emerging markets.

The 30 stocks in the Russian MICEX index have an earnings yield, or earnings as a proportion of stock price, from 11.1 percent. That is 1.9 times the yield of 5.85 percent in Russia in U.S. corporate bonds, according to JPMorgan Chase & Co. 's EMBI +. The average multiple of 2.05 percent since June is the highest for a period of half a year.

The Micex has gained 22 percent this year, beating rates of Brazil, India and China, the largest energy exporting country benefits from an increase of 26 percent oil in the last four months and expectations investors will join the World Trade Organization. Investors poured 2.6 billion U.S. dollars in funds from Russia's actions in this quarter, the highest since 2009 and four times the amount of bonds, according to data compiled by EPFR Global, a research firm in Cambridge, Massachusetts.

"There is a clear change in bond money from Russia goes to riskier instruments such as equities," said Mark Rubinstein, director of research at IFC Metropol in Moscow, in a telephone interview. "Investors see that the majority of first-rate bonds are paying 5 percent or less."

The yield on dollar bonds sold by the Russian companies has fallen 14.5 percentage points since October 2008 of 20.4 percent, according to JPMorgan Chase & Co. 's EMBI +. Russian average is less than the 6.21 percent yield for corporate bonds in Brazil, according to the index.

Gazprom, Severstal

The revenue performance of OAO Gazprom, the Russian monopoly over gas exports, is 21.5 percent. bonds of the state-owned company in dollars maturing in 2015 was 4,493 per cent yesterday.

OAO Severstal, Russia's largest steelmaker, more than double in the bag Micex stock this year, the biggest gain in the stock market in Moscow in 2010. That compares with a return of 20 percent of total dollar bonds maturing in 2013 the Cherepovets-based company.

"Russia is the flavor of the month between the strategists of emerging market equities," said Brad Durham, a co-founder of Global EPFR, the comments via email. "The market is trading at an attractive valuation and the expectation of higher profitability in the energy sector in the coming year is to benefit energy companies in Russia."

The MICEX index rose 16 percent this quarter, beating a 4.8 percent rise for the MSCI Emerging Markets Index, after a performance below the first three quarters.

Evraz, Mechel

Evraz Group SA, Russia's second largest steelmaker, rose 14 percent in the last month, and OAO Mechel, the country's largest producer of coal for steelmakers, surged 20 percent of commodities went up and gave Russia one step closer to WTO accession by signing an agreement with the European Union on 7 December. Russia's bid to host the 2018 World Cup contributed to the gains as the government prepares to spend 3.8 billion U.S. dollars on stadiums and expanding airports and highways.

The earnings performance for the Micex is more than twice the rate of China's Shanghai Composite Index and India's Sensex index of 5.4 percent compared with Brazil's Bovespa index at 7.3 percent
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Tickets for capital funds this quarter is the highest since the 2.85 billion U.S. dollars received in the last quarter of 2009 and the third-largest total since the first quarter of 2006, when Russia took funds at $ 3.8 billion, the data show EPFR.

"Hot money"

"Speculative hot money" in exchange-traded funds contributed to the influx, "said Chris Weafer, chief strategist at UralSib Financial Corp.

BlackRock Inc., the largest money manager, opened its iShares MSCI Russia cap index fund on 10 November. It follows Van Eck Associates Corp. 's Market Vectors Russia Foundation was created in April 2007 and SSgA Fund Management Inc.' s SPDR S & P Russia ETF, which began in March 2010.

"ETFs are very dynamic and driven flow we are seeing a lot, especially after iShares launched the fund," Weafer said in a telephone interview on 22 December in London. "But the money from the ETF tends to be much less stable than investment funds, which charge higher fees and have more time horizons."

Russian bonds in 2020 the dollar rose, pushing the yield 13 basis points below 5.01 percent. The extra yield investors demand to hold the Russian debt rather than U.S. Treasuries fell 4 basis points to 196 yesterday, according to JPMorgan Chase & Co. 's EMBI + index. The difference compared to 140 for Mexico's debt with similar qualifications and 179 for Brazil, two steps that is rated below Baa3 by Moody's Investors Service.

Spreads, swaps

The yield of Russian bonds is 43 basis points below the average for emerging markets, the biggest difference since 21 October, according to JPMorgan.

The cost of protecting Russian debt against default by five years using credit-default swaps fell 2 basis points yesterday to 147, below the peak year of 217, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent of a borrower fail to adhere to its debt agreements.

Swaps credit-default for Russia, rated Baa1 by Moody's, the third lowest investment grade rating, cost of 6 basis points more than the contracts in Turkey, classified as four levels lower than Ba2. Russia swaps cost as much as 40 points lower on 20 April.

The ruble, which is administered by the central bank against a dollar-euro basket to limit swings, was little changed at 30.6100 per dollar in Moscow yesterday, its strongest level since 11 November. non-deliverable, which provide a guide to the expectations of currency movements and interest rate differentials, to show the depreciation of the ruble at 30.8500 per dollar in three months.

The slower growth

While yields are higher incomes in Russia, companies in the other BRIC nations benefit from higher rates of economic growth. Russian economic growth at 3.8 percent this year compared with 7.5 percent in Brazil, 9.7 percent in India and 10.5 percent in China, according to forecasts by the International Monetary Fund Washington.

Russian stocks are outperforming oil traded above $ 90, the highest price in two years. Russian efforts to win 10 to 20 percent in 2011, with the market slowdown in the second half of the year, interest rates and inflation rises, Rubinstein said Metropol.

"The rotation is certainly the case with most of the entries in the accounting firms of second and third, because of the ratings better," said Gregory Klumov, head of Moscow-based investment Everest Asset Management, which oversees about $ 300 million in the e-mail comments on 22 December.