Accessibility Links

Russia Stocks Retreat First Day in Four on Commodities, Europe

19 Oct 2012

Russian stocks dropped for the first time in four days as commodities slumped and the European Union summit failed to boost investor confidence the region’s debt crisis will be contained.

The Micex Index (INDEXCF) slid 0.6 percent to 1,465.92 by 2:23 p.m in Moscow, paring its weekly gain to 1.4 percent. Basic metals and utilities stocks declined the most, losing more than 0.9 percent on average. OAO Severstal, a steelmaker, and aluminum producer United Co Rusal tumbled 1.3 percent and 1.2 percent, respectively. OAO Transneft, the oil pipeline operator, dropped 1.8 percent.

Oil, Russia’s main export earner, traded down for the second day, at $91.98 a barrel in New York. Most metals, including nickel and tin, sank in London. A European Union summit failed to discuss further financial assistance for Spain, according to French President Francois Hollande.

“The European Summit is the main concern for the Russian market,” Peter Szopo, head of research at Alfa Bank, said by phone. “Negotiations about Spain and banking regulation progressed but there was a lot of disagreement. Commodities are weak on the economic growth concerns.”

OAO Rosneft, Russia’s biggest oil producer, lost 1.3 percent to 216.65 rubles, while OAO Gazprom, the natural gas export monopoly, slid 0.7 percent to 154.15 rubles.

TNK-BP Detention

OAO TNK-BP Holding (TNBP), the traded unit of BP’s Russian venture, plunged as much as 3.8 percent before trading down 0.8 percent at 79.44 rubles. Police detained the head of the company’s government relations department on suspicion of seeking bribes to sell government posts. TNK-BP is aware of the man’s detention, which is not related to his work at the company, the press office said by e-mail.

The Russian Depositary Index (RDXUSD) of global depositary receipts traded in London fell 1 percent to 1,682.40.

The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, dropped 0.1 percent to $29.41 yesterday, falling for the first time in four days. The RTS Volatility Index, which measures expected swings in the index futures, was unchanged at 25.30.

Prime Minister Dmitry Medvedev said today the government will discuss the planned asset sales at the next meeting and the program is being finalized.

Nomos Bank rose 3.1 percent to 825 rubles, poised for the strongest close since April 3. Otkritie Financial Corp. plans to buy minority stakes in Nomos Bank for $14 per global depositary receipt and will make an announcement within the next two weeks, said three people with knowledge of the plans.

The Micex trades at 5.6 times estimated earnings after gaining 4.3 percent this year. That compares with a multiple of 10 times for the MSCI Emerging Markets Index, which has added 10 percent.

Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.