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Sales Disappointment Sinks Yandex as ADRs Drop

Yandex NV (YNDX) led declines in Russian stocks traded in New York, as the benchmark index fell by the most in a week, on concern sales growth for the nation’s biggest Internet search engine will slow in the second half of the year.

The Russian company dropped the most in eight months yesterday, tumbling 7.7 percent to $19.23, and paring its gain in July to 0.9 percent. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies listed in the U.S. slumped 2.1 percent to 90 yesterday, the biggest decline since July 23. The RTS stock-index futures expiring in September lost 0.4 percent to 136,405.

Yandex reiterated its forecast for 40 percent to 45 percent revenue growth in 2012, after sales rose 50 percent in the first half of the year. Oil, the nation’s biggest export earner, retreated the most in a week on speculation the Federal Reserve will be less likely to announce additional measures to stimulate the economy after U.S. consumer confidence and business activity unexpectedly grew.

“Some investors may have expected they’d revise the forecast for 2012 during their call with analysts,” Alexander Vengranovich, an analyst at Otkritie Financial Corp., said by phone from Moscow yesterday. “If oil falls further, that would lead to advertising budget cuts throughout the country.”

The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, fell 1.7 percent to $26.45. The RTS Volatility Index, which measures expected swings in the index futures, rose 1.1 percent to 35.07.

‘Absolutely Optimistic’

Yandex has not seen any slowdown in its business so far this quarter, Chief Financial Officer Alexander Shulgin said at a July 31 conference call with analysts and investors.

“We are absolutely optimistic about our performance this year,” Shulgin said.

The company continues to expand its business in Turkey, Arkady Volozh, chief executive officer at Yandex, said during the conference call yesterday.

Second-quarter net income climbed to 1.98 billion rubles ($61.5 million) from 1.13 billion rubles in the same period last year, Yandex said in a July 31 statement.

Yandex’s sales growth forecast of as much as 45 percent for this year follows an increase of 60 percent in revenue in 2011. Facebook Inc., the world’s largest social-networking service, also reported last week second-quarter earnings that showed slowing growth.

Facebook Slowing Growth

“Some have expected Yandex would revise its 2012 revenue growth forecast,” Iouli Matevossov, a senior analyst at Alfa Bank, said by phone from Moscow yesterday. Investors were expecting “results would exceed analysts’ estimates. The sentiment on the industry remains negative following disappointing Facebook results,” he said.

Russia, the world’s largest oil producer outside of the Organization of Petroleum Exporting Countries, received about half of its 2011 budget revenue from sales of oil and natural gas.

Oil for September delivery dropped 1.9 percent to $88.06 a barrel on the New York Mercantile Exchange yesterday. Prices climbed 3.6 percent in July and declined 11 percent this year.

Brent for September settlement retreated 1.2 percent to $104.92 a barrel on the London-based ICE Futures Europe exchange. Urals crude lost 1.8 percent to $104.21 per barrel yesterday.

Federal Reserve policy makers will announce today their decision whether action is needed to boost an economy that’s slowed for two straight quarters. Fed Chairman Ben S. Bernanke said July 17 that the central bank was studying options for further easing of monetary policy.

‘How Much Support’

“The market is waiting for the Fed to provide clarity on near-term actions,” Ilya Kravets, a portfolio manager analyst at ED Capital in New York, said by e-mail yesterday. “People are not so sure that the Fed will pump anything significant or how much support it would provide.”

The Conference Board’s confidence index increased to 65.9 last month from a revised 62.7 in June, figures from the New York-based private research group showed yesterday. Economists projected a reading of 61.5, according to the median estimate in a Bloomberg survey.

Business activity in the U.S. grew at a faster pace in July. A barometer from the Institute for Supply Management- Chicago Inc. increased to 53.7 from 52.9 in June. Readings greater than 50 signal growth. A Bloomberg survey projected the purchasing managers’ gauge would decline to 52.5.

CTC, MTS

United Co. Rusal (486), the world’s largest aluminum producer, was unchanged at HK$4.22 in Hong Kong trading as of 11:42 a.m. local time. The MSCI Asia Pacific Index fell 0.5 percent today as manufacturing data from Australia to China disappointed investors.

CTC Media Inc. (CTCM), the Nasdaq-listed Russian television company, was the biggest decliner on the Bloomberg Russia-US Index in July and OAO Mobile TeleSystems, or MTS (MTSS), the country’s biggest mobile phone company, was the biggest gainer. The gauge rose 1.5 percent in July, gaining for a second consecutive month.

American depositary receipts of MTS lost 1 percent to $18.95. MTS rose 0.9 percent to 247.70 rubles in Moscow, the equivalent of $7.69. One ADR is equal to two ordinary shares.

MTS (MBT) President Andrey Dubovskov sent an open letter to Uzbek President Islam Karimov asking for his “personal participation” in resolving the company’s conflict with Uzbek authorities as MTS seeks to reinstate its license in Uzbekistan and demands a release of its five employees detained by Uzbek authorities in July, the company said in a July 31 statement.

OAO Mechel (MTLR), the country’s biggest maker of coking coal, gained 5.9 percent to $6.48, the highest since July 5. The company fell 1 percent to 196.90 rubles, or $6.11, in Moscow.

Mechel said it increased production of coal by 7 percent in the first half of 2012 to 13.4 million tons, according to the company’s statement 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: Tal Barak Harif at tbarak@bloomberg.net

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