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Day traders boost Russia
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May 5, 1999: 7:56 a.m. ET
Moscow climbs to pre-crisis level as small investors display appetite for risk
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LONDON (CNNfn) - U.S. day traders helped lift the Russian stock market back to pre-crisis levels Wednesday as renewed appetite for risk led investors towards Russian oil and telecom stocks.
Moscow's RTS1-Interfax share index soared 15 percent to reach 105 and breach the 100 barrier for the first time in 10 months. However, the index slipped back to 100.1 in afternoon trading - which is still a 9 percent rise.
Analysts warned that the recovery could prove short-lived as political tensions threaten to derail a prolonged rebound
While the surge in oil prices has drawn investors to the oil-heavy Moscow index, a weekend report in Barrons recommending Rostelekom, the Russian telecom monopoly, also had a pronounced effect after Moscow's holiday closure on Monday and Tuesday.
"The American day traders have popped up in Russia for the first time," said David Longmuir, head of equity sales at Renaissance Capital.
Rostelekom ADRs surged 22.5 percent to 85 cents. The company also announced Wednesday that it may merge with Svyazinvest, the holding company which is its largest shareholder.
Volumes in the Russian market have been tiny since last August's ruble devaluation, with total daily trading averaging $6 million to $7 million. Longmuir said the buying started in Russian ADRs in New York and spread to the Moscow market Wednesday. "It doesn't take much to move Russia," he said.
Midday volumes Wednesday reached $10 million and Longmuir said the bulk was in small trades.
Sentiment towards Russia has been boosted by last week's agreement by the International Monetary Fund to lend Russia $4.5 billion, though details have still to be thrashed out. Longmuir said he is still cautious on the short-term outlook.
The Duma, Russia's lower house of parliament, has still to approve the IMF deal, and may start impeachment proceedings against President Boris Yeltsin next week. "We think there's going to be an awful lot of political noise," he said.
The broader Reuters Russian composite was 14.17 percent higher at 310.84, the Reuters ADR index jumped 16.74 percent to 91.18 and the Vienna bourse's Russian traded index added 10.95 percent to 246.52.
Among oil stocks, which account for around 60 percent of the Moscow market, ADRs in Lukoil, the country's largest producer, climbed 13.3 percent to $10.50. Energy company Mosenergo gained 8.51 percent to reach 2.55 cents. Surguneftegaz was up 12.49 percent to 17.2 cents.
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