Russian shares to gain six percent by year-end

Russian shares will rise by more than 6 percent by the end of the year as the threat of crippling Western sanctions is expected to recede, although an economic slowdown will cap gains, a Reuters poll found. The dollar-based RTS share index fell sharply to multi-year lows earlier this year as Russia's economy slowed and the Ukraine crisis intensified, but the index has recouped some of its losses and is now down just 4 percent in 2014.
US and European leaders have said Russia faces the risk of targeted sanctions on specific sectors of the economy unless it fails to defuse tensions between pro-Russian separatists and the Ukraine government. But analysts see the likelihood of sweeping sanctions as remote.
Russian stocks were boosted on Tuesday by President Vladimir Putin moving to revoke powers to order military intervention in Ukraine - a conciliatory gesture that was cautiously welcomed by Kiev and the West.
The rouble is down more than 2 percent against the dollar in 2014, although it has recouped the bulk of this year's losses since touching a historical low in March.
"Sentiment has reversed and people ... are perhaps thinking that they have been underweight Russia too long. I think we are entering the summer with cautious optimism," said Erik DePoy, a strategist at Gazprombank.
The median forecast from 12 analysts, taken in the past week, showed the RTS would end the year at 1,473, around 30 points higher than its 2013 close.
Reflecting uncertainty, end-year forecasts ranged from 1,250 to 1,600.
The forecast was more optimistic than a poll taken in March, at the height of tensions over Ukraine, when analysts predicted the index would close 2014 at 1,300 points.
Russian equities dived around 18 percent in March after Russia's parliament granted Putin the right to send troops to Ukraine and the West announced it would impose sanctions over Moscow's annexation of Crimea.
They pared losses after the sanctions turned out to be tamer than first feared - only targeting a select group of individuals and companies - and the likelihood of Russia invading eastern Ukraine eased.
But a slowdown in economic growth, which is forecast to come in at just 0.5 percent this year, has prevented domestic stock indexes from rebounding further.
"I am an optimist based on higher oil which will offer more spending options for the government this year, (and I) definitely think the sanctions risk is over as both Moscow and Kiev need to focus on economic recovery," said Chris Weafer, founding partner at consultancy Macro Advisory.
The RTS fell 5.5 percent in 2013, wiping out some of the 10 percent it gained in 2012. It closed at 1,383 on Wednesday.