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Stocks Drop to 3-Month Low on Shrinking Output: Russia Overnight

Russian equities traded in New York tumbled to a three-month low on concern shrinking manufacturing in China and Europe will curb demand for metals and oil.

The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. dropped 1.9 percent to 101.81 in New York, the lowest level since Jan. 24, led by hydropower company OAO RusHydro and OAO GMK Norilsk Nickel, the world’s biggest producer of the metal. Moscow’s Micex Index (INDEXCF) slipped 2.6 percent to close at 1,466.34, after the evening session of trading was halted for about four hours for technical reasons.

All but three of the 14 stocks in the Russia-US gauge dropped yesterday as a preliminary purchasing managers’ index signaled Chinese manufacturing may contract for a sixth month in April. Crude, Russia’s biggest export earner, slid the most in two weeks and copper, nickel and aluminum prices sank. In the euro zone, an index based on a survey of purchasing managers in services and manufacturing fell to a five-month low.

“Russia, being a high beta market, gets negatively impacted when there is evidence of global slowdown,” Arjun Jayaraman, who manages $400 million in emerging-market equities at Causeway Capital Management LLC in Los Angeles, said by e- mail yesterday. “The PMI numbers coming out of China, as well as Europe, indicate contraction. Oil prices are also being negatively impacted by this.”

Futures expiring in June on Russia’s dollar-denominated RTS Index, which weren’t affected by the Micex-RTS trading disruption, added 0.8 percent to 153,475.

RusHydro Slump

RusHydro’s American depositary receipts fell 4.1 percent in New York, the most since March 6, to $3.50. The ADRs traded at a 0.8 percent discount to the company’s Moscow-listed shares, data compiled by Bloomberg show. The Moscow-based company was the biggest decliner on the Bloomberg Russia-US Equity index today.

In Moscow, RusHydro dropped 3.8 percent to 1.0425 rubles, or 4 U.S. cents. One U.S.-traded ADR in the company is equal to 100 ordinary shares in Moscow.

Norilsk fell 3.8 percent in New York to $17.34, the most since March 20, to trade at a 0.5 percent discount to the company’s Moscow-listed shares. Ten U.S.-listed ADRs are equal to one ordinary share of Norilsk. The stock fell 3.4 percent to 5,147 rubles, or $174.23, in Moscow yesterday.

The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, declined 2.3 percent, the most since April 10, to $29.63 yesterday. The RTS Volatility Index, which measures expected swings in the index futures, dropped 0.9 percent to 32.97 points in U.S. trading.

‘Spread Too Thin’

VimpelCom Ltd. (VIP), the world’s sixth-largest wireless operator by subscribers, said in a statement yesterday that it sold its entire 49 percent stake in its GTEL subsidiary in Vietnam for $45 million in cash. VimpelCom slipped 3.6 percent to $9.82 in New York, the lowest since Jan. 4.

“VimpelCom selling its Vietnam operations fits in with what I have been saying about them being spread too thin to manage so many markets,” Hawk Sunshine, who manages $300 million in assets at brokerage IFC Metropol in Moscow, said by e-mail.

Russia’s Micex-RTS Exchange resumed trading on its indexes at 9:50 p.m. yesterday in Moscow, according to a statement on the bourse’s website. Trading data from 5:41 p.m. on will be restored, the statement said.

It was the second trading halt since the Micex and RTS exchanges merged in December and the third in the past 12 months, Nikita Bekasov, spokesman for the exchange, said yesterday by phone. False data was reflected in the trading system for an unknown reason and the Micex-RTS is undertaking an investigation, he said.

Micex-RTS ‘Emergency’

“We hope there will be no loss to anyone,” Bekasov said, adding that equities and bonds trading on the Micex’s main market were affected. “We treated the situation as an emergency, making sure no one left work here at the Micex before the system was restored.”

Brazil’s Bovespa Index has delayed the start of trading three times over the past 12 months in Sao Paulo. The last time the exchange used a circuit breaker to halt trading was in October 2008.

“Clients seem frustrated,” Luis Saenz, chief executive officer of the U.S. unit of Moscow brokerage Otkritie Financial Corp., said in a phone interview yesterday. “I hope that it doesn’t resemble how they deal with the future reforms coming up.”

Russia’s Micex-RTS Exchange plans to debut a central securities depositary in July and move away from immediate settlement of transactions, changes that bring the market into line with developed market bourses and will allow conservative investors such as pension funds to buy Russian equities, Micex- RTS President Ruben Aganbegyan said in an interview at Bloomberg’s headquarters in New York on April 16.

Crude Slides

Crude oil for June delivery dropped 0.7 percent to $103.11 a barrel on the New York Mercantile Exchange yesterday. Futures have declined 8.2 percent in the past year.

Brent oil for June settlement was little changed at $118.71 a barrel on the London-based ICE exchange. Urals crude, Russia’s main export blend, was little changed at $115.75.

The Standard & Poor’s GSCI Index of 24 commodities declined 0.3 percent yesterday.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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