Stocks in Moscow are on track to post nearly a 10% gain this week in their biggest upward swing since last March. Near-term resistance is turning into support here.
October 4 was the bottom for Moscow. Since then, the benchmarks are back up an even 20% — but still have 18% to climb before they even challenge the levels they were at at the beginning of September.
And the peak of April — before the commodity markets fell apart — is still 48% away.
But in the near term, the question is whether the rally can continue without either an additional positive catalyst or a rest.
A lot of these stocks are easily at their highest levels in a month, but have a long way to go before they test the 50-day trend.
Names like Mobile Telesys (MBT, quote) and Norilsk (NILSY, quote) would need to rebound another 6% before they even challenge that resistance line.
Other plays have outperformed a bit. Gazprom (OGZPY, quote) is only 2% below the trend but VimpelCom (VIP, quote) just broke above it.
Independent petroleum producer Lukoil (LUKOY, quote) is now 2.2% above the before traders get the urge to start taking profits.
Long- or short-term, these stocks still look cheap even by emerging markets standards.
Russian blue chips are currently trading at 5 times current earnings, versus a P/E of 11.2 for China and 14.5 for India.
Granted, there is a “Putin put” built into those valuations to compensate traders for Kremlin risk, but with the broad Russian ETF (RSX, quote) a full 5.3% below its 50-day average price, these stocks are trading at a wider discount than normal.