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Jan. 26, 2009, 4:02 p.m. EST

Russian stocks rally, led by miners, energy firms

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By Polya Lesova, MarketWatch

NEW YORK (MarketWatch) -- Stocks in Moscow rallied Monday, as surging commodity prices boosted energy and mining companies, while Russia's largest bank, Sberbank, reported a rise in third-quarter net profit.

The ruble-denominated Micex stock index surged 10.8% to 613.56 points.

At Moscow's other exchange, the dollar-denominated RTS stock index rallied 8.3% to end at 539.38 points. The index, however, is down 15% year-to-date.

In New York trading, the Market Vectors Russia ETF /zigman2/quotes/200464876/composite RSX 0.00% , which tracks the Russian stock market, gained 5.2%.

The surging prices of oil, gold and other commodities buoyed the Russian markets, which are dominated by resource stocks. See Futures Movers.

The RTS Oil and Gas index soared 9.6%, as shares of oil giants Lukoil , Rosneft /zigman2/quotes/210467969/delayed UK:ROSN 0.00% and Gazprom all posted strong gains.

Shares of Novolipetsk Steel /zigman2/quotes/200815833/delayed UK:NLMK 0.00% and Polyus Gold /zigman2/quotes/203861007/delayed UK:PLZL 0.00% led the mining sector higher.

"It's [Russia] essentially the cheapest of all emerging markets," said Tim Steinle, co-manager of the Eastern European Fund /zigman2/quotes/203809982/realtime EUROX -0.62% at U.S. Global Investors.

"I don't think we're out of the woods yet," Steinle said. "The first quarter is going to be tough for everyone. We're being very cautious and selective."

There are good investment opportunities in Russia's energy sector, which is "by far the cheapest," as well as in the steel and retail sectors, Steinle said.

Sberbank's net profit rises

Russia's largest bank, Sberbank , said Monday that its net profit rose 5.9% to 23.2 billion rubles in the third quarter of 2008 compared with a year earlier.

Sberbank had losses on operations with securities in the amount of 16.3 billion rubles, generated mostly by unrealized revaluation losses on securities in the third quarter.

"These losses were influenced by the decline of the global and the Russian financial markets," Sberbank said in a statement.

Steinle of U.S. Global Investors said that "on the whole, people expected worse" from Sberbank, so the bank's results were "positive" for market sentiment Monday.

Last week, Russia's second-biggest bank, VTB , reported a net loss of $363 million in the third quarter of 2008, citing the sharp slowdown in the Russian economy. Both Sberbank and VTB are state-controlled banks.

Russia was the worst performing major emerging market in 2008, when the MSCI Russia index tumbled 74%. Investors pulled billions of dollars out of Russia on concerns over falling commodity prices, domestic political risk and the deteriorating outlook for the Russian economy.

/zigman2/quotes/200464876/composite RSX 5.65, 0.00, 0.00%
RSX

Last week, Russia's central bank said that it will effectively allow a 10% devaluation of the ruble, ending its policy of gradual mini-devaluations in a move aimed at deterring speculators and stemming the outflow of foreign exchange reserves.

Since last August, Russia's international reserves have plunged by more than $200 billion to stand at $396.20 billion as of Jan. 16. The steep decline has been largely caused by the bank's attempt to defend the ruble.

The ruble is a managed currency and its new upper limit was set last week at 41 rubles against a currency basket made up of 45% euros and 55% dollars. Read more.

"Most Moscow insiders believe this was a sound move, and that the new band is appropriate at $35 to $45 oil," said Cliff Kupchan, director for Europe and Eurasia at Eurasia Group.

"But that is the great gamble," Kupchan said in a research note. "If oil drops further, or if markets don't accept the new upper limit, further large interventions could become necessary and even fragile confidence would evaporate."

/zigman2/quotes/200464876/composite
US : U.S.: Cboe BZX
$ 5.65
0.00 0.00%
Volume: 0.00
Sept. 30, 2022 4:10p
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/zigman2/quotes/210467969/delayed
UK : U.K.: London
$ 0.60
0.00 0.00%
Volume: 0.00
March 3, 2022 8:00a
P/E Ratio
0.48
Dividend Yield
49.11%
Market Cap
$26.30 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/200815833/delayed
UK : U.K.: London
$ 0.32
0.00 0.00%
Volume: 0.00
March 3, 2022 8:00a
P/E Ratio
0.04
Dividend Yield
1,498%
Market Cap
$10.10 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/203861007/delayed
UK : U.K.: London
$ 3.90
0.00 0.00%
Volume: 0.00
March 3, 2022 8:00a
P/E Ratio
0.47
Dividend Yield
98.13%
Market Cap
$12.90 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/203809982/realtime
US : U.S.: Nasdaq
$ 3.21
-0.02 -0.62%
Volume: 0.00
Sept. 30, 2022
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Polya Lesova is a New York-based reporter for MarketWatch.

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