December 19, 2013 / 2:40 PM / 6 years ago

UPDATE 1-Russian stocks gain on news Putin may soon pardon Khodorkovsky

MOSCOW, Dec 19 (Reuters) - Russian stock markets gained on Thursday after President Vladimir Putin said he would pardon jailed oil tycoon Mikhail Khodorkovsky, a boost for investors increasingly worried about political freedoms and Russia’s ability to reform the economy.

Russian stocks have underperformed emerging market peers as a Kremlin crackdown on political opposition raised concerns about the rule of law, a slowing economy and shoddy treatment of minority shareholders.

That has helped prompt an exit of capital but analysts say that Russia’s discount to emerging markets first started to widen after Khodorkovsky was jailed in 2003.

“It is quite likely that (his release) will give a short term boost to investors’ perception of Russia, particularly U.S. investor perception,” said an economist from a Moscow-based investment bank.

“It was always an easy win for Putin to let him out, because he is not popular and he does not have significant resources, but his being in prison does generate bad PR.”

At 1354 GMT the rouble-denominated MICEX index was up 0.9 percent at 1,500 points and dollar-denominated RTS index rose 0.7 percent to 1,434 points.

The Russian rouble traded down 0.3 versus the dollar after moving closer to the session’s strongest levels when Putin’s comments were reported.

Once Russia’s richest man, Khordorkovsky was arrested in 2003 after falling out with Putin and has been convicted of crimes including fraud, theft and money laundering. Kremlin critics say Khodorkovsky is the victim of a campaign to punish him for perceived political challenges to Putin.

“(His proposed release) gives a perception of improved investment climate and corporate governance,” said one Moscow-based trader, who added that state-controlled companies which are the most sensitive to such sentiment are rising.

“People think this is a good sign,” the trader said.

Stocks in Russian blue chip heavyweights rose including gas producer Gazprom up 1.4 percent, oil giant Rosneft up 1.5 percent. Metals and mining stocks, such as Norilsk and Severstal rose 2.6 and 4 percent respectively.

Shares were firmer earlier in the day after the U.S. Federal Reserve signalled it would keep interest rates low for longer even as it announced it would start trimming its bond-buying stimulus.

“Taking into account the positive reaction of the market on yesterday’s decision by the Federal Reserve, this (news about Khodorkovsky) opens the way for a New Year rally, which may continue in January, as well,” said Vladimir Chkhikvadze, senior salesman at J.P. Morgan in Moscow.

For rouble poll data see

For Russian equities guide see

For Russian treasury bonds see

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