Russian equities traded in New York headed for their third straight monthly decline, the biggest stretch of losses in three years, as a tumble in Brent crude sent OAO Lukoil (LUKOY) and OAO Gazprom Neft (GZPFY) lower.
The Bloomberg Russia-US Equity Index (RUS14BN) of the most traded Russian companies in New York sank 2.7 percent to 82.65 yesterday, extending its retreat for a third month, the longest string of declines since February 2009. Lukoil, Russia’s largest non-state oil producer, fell from a two-week high while Gazprom Neft, the oil arm of Russia’s biggest company by value, slipped the most in a week. Futures on the dollar-denominated RTS index (RTSI$) gained 0.1 percent.
Brent crude, which underpins Russia’s Urals crude blend, settled below $104 for the first time this year, and has retreated 14 percent this month as concern about the European debt crisis deepened. Russia, the world’s biggest energy exporter, obtained almost 50 percent of budget revenue from oil and gas sales last year. Finance Minister Anton Siluanov said yesterday that the government can increase taxes on its oil and gas producers.
“The price of oil has gone straight down and there’s been real disappointment in the government’s decisions,” Bruce Bower, a partner at Moscow-based hedge fund Verno Capital, which manages more than $200 million in Russia, said by phone yesterday. “Russia continues to be seen by international investors as an oil play.”
The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, lost 3 percent to $24.15. The RTS Volatility Index, which measures expected swings in the index futures, fell for the second time in three days, retreating 1.3 percent to 45.07 points.
Crude traded in New York tumbled to a seven-month low, falling 3.2 percent to $87.82 a barrel, the lowest settlement since Oct. 21. The decline followed speculation that U.S. crude stockpiles had climbed to the highest level since 1990 while economic confidence in the euro area dropped to its lowest since 2009, according to a European Commission report.
Brent oil for July settlement sank 3 percent to $103.47 a barrel on the London-based ICE Futures Europe exchange. In earlier trading, the contract touched $102.85, the lowest level since Dec. 19.
China’s state-run Xinhua News Agency said the government has no plans to introduce stimulus measures to support growth on a scale similar to measures enacted during the global credit crisis in 2008.
“With Spain and Greece in the crosshairs, oil lower, and to a lesser extent China slowing, the conditions have not been favorable for Russian stocks,” Nelson Saiers, who oversees $639 million at Alphabet Management LLC as chief investment officer of the New York-based hedge fund, said in a telephone interview.
Lukoil, Gazprom Neft
Concerns over a deepening crisis in Europe dragged the MSCI Asia Pacific Index down by 1.3 percent today as of 11:10 a.m. Hong Kong time. United Co. Rusal (486), the world’s largest aluminum producer, dropped 1.5 percent to HK$4.59 in Hong Kong trading.
Lukoil dropped 2.3 percent to $52.25 after shares fell 1.4 percent on the Micex to 1,705.20 rubles, or $52.02. Gazprom Neft slipped 2.3 percent to $20.11 while shares in Moscow dropped 1.1 percent to 131.20 rubles, or the equivalent of $3.99. One ADR equals five ordinary shares.
OAO Mechel (MTLR), Russia’s largest coal producer for steelmakers, retreated 4.8 percent to $5.5 in New York. Europe and Asia accounted for 34 percent of the Moscow-based mining company’s 2011 revenue, according to data compiled by Bloomberg. Mechel shares in Moscow tumbled 4.7 percent to 182.40 rubles, or the equivalent of $5.55.
The RTS Index in Moscow declined 2.4 percent, the most in a week, to 1,275.16 while the 30-stock Micex (INDEXCF) Index lost 1.4 percent to 1,308.30.
Yandex NV (YNDX), the operator of Russia’s most popular Internet search engine, declined 3 percent in New York to $20.42. Russian lawmakers introduced a bill yesterday that would add television and radio channels as well as websites to the list of the country’s strategic state assets, according to a statement on the parliament’s website.
The Netherlands-based Yandex has gained 3.7 percent in 2012, making it the second-best performer this year on the Bloomberg Russia-US Equity Index after OAO Mobile TeleSystems (MBT), the country’s largest mobile-phone operator. MTS, as the company is known, has advanced 15 percent in New York.
“Russia’s consumer-focused companies have done much better this year than energy producers,” Bower added. “There’s been a differentiation in the market whereby domestic names have benefited from a relatively healthy economy.”
Verno Capital increased its stake this year in MTS and OAO Magnit, Russia’s biggest food retailer, Bower said.
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