(Updates to reflect afternoon trading)
MOSCOW Aug 11 Russian shares rose on Monday
after stock-index compiler MSCI kept Russia's two largest banks,
Sberbank and VTB, in its MSCI Russia index,
and as investors concluded international tension over Ukraine
At 1320 GMT, the dollar-denominated RTS index was up
2.5 percent to 1,199 points, while its rouble-based peer MICEX
traded 1.8 percent higher at 1,372 points.
Sberbank and VTB outperformed the broader market, rising by
4.6 percent and 3.9 percent, respectively, on MICEX.
"Given the decision by MSCI not to exclude the shares of
Sberbank and VTB from its indexes, as well as the lack of
negative news from Ukraine, we expect the Russian stock market
to recover at the start of this week," said Yevgeny Loktyukhov,
an analyst at Promsvyazbank.
MSCI held consultations with investors on whether to exclude
the banks from its Russia index after the European Union banned
all EU nationals and companies from buying or selling new bonds,
equity or other financial instruments with a maturity of more
than 90 days issued by Sberbank, VTB and three other major
state-owned Russian banks.
MSCI indexes are used by many investment funds to determine
their weightings, so exclusion from the Russia index could have
significantly reduced demand for the banks' shares.
Russian assets were also supported by comments from
President Vladimir Putin's spokesman, who said that Russia would
only send humanitarian aid to Ukraine - where pro-Russian
separatists are fighting government forces in the east of the
country - if all parties agreed to the move.
Ukraine has repeatedly said it fears an invasion from Russia
under the cover of a humanitarian operation, and Western powers
have threatened more sanctions should Russia intervene.
Russia's Defence Ministry also said late on Friday it had
finished military exercises in southern Russia which the United
States had criticised as a "provocative" step.
Despite the apparently conciliatory gestures, however,
fierce fighting in Ukraine and threats of sanctions by Kiev
against Russia, which may include cutting off energy supplies to
EU customers, mean markets are likely to remain volatile.
"Considering the strengthening of Kiev's position in the
south-east of Ukraine and the threats to stop transit of Russian
oil and gas to Europe, we expect a continuation of high
tensions. At the same time Moscow's reaction looks unclear," BCS
analyst Mark Bradford said in a note.
The rouble was 0.18 percent stronger against the dollar at
36.05 and gained 0.38 percent versus the euro to
trade at 48.26.
That left the Russian currency 0.27 percent stronger at
41.54 against the dollar-euro basket the central bank
uses to gauge the rouble's nominal exchange rate.
For rouble poll data see
For Russian equities guide see
For Russian treasury bonds see
Russia in graphics: link.reuters.com/dun63s
(Reporting by Alexander Winning and Vladimir Abramov; Editing
by Jason Bush, Larry King)