Russian Equities Decline as Rusal Falls on Morgan Stanley Cut

Russian (INDEXCF) equities fell as United Co. Rusal, the world’s largest aluminum producer, retreated after Morgan Stanley cut the company to the equivalent of sell, citing its share price.

The Micex Index declined 0.6 percent to 1,527.70 by 10:21 a.m. in Moscow. Of the 50 stocks in the gauge, 6 advanced and 44 slid. The RTS Index (RTSI$), Russia’s dollar-denominated equity gauge, lost 0.7 percent to 1,594.72. Health care, industrial shares dropped at least 1.2 percent. Rusal fell 2.1 percent, the biggest decliner on the Micex. PIK Group (PIKK), a residential developer, retreated 1.3 percent.

Rusal climbed to an almost seven-month high on Jan. 10 after the company controlled by billionaire Oleg Deripaska, and Vladimir Potanin last month settled a battle for control that lasted more than four years. Emerging-market stocks fell to a one-week low on weaker sales growth at Apple Inc.

“We believe UC Rusal’s recent rally fully reflects the benefits from resolution of shareholder conflict with Norilsk Nickel,” Dmitriy Kolomytsyn, an analyst at Morgan Stanley, said in an e-mailed report today.

The amount of shares traded on the Micex was 43 percent above the 30-day average, data compiled by Bloomberg show. The Micex’s 10-day volatility climbed to 13.078.

Crude oil climbed 0.2 percent to $95.43 in New York. Russia receives about half of its budget revenue from oil and natural gas.

U.S. lawmakers voted to lift the nation’s debt ceiling through mid-May as a Bloomberg poll showed global investors say the state of the American government’s finances is the greatest risk to the world economy.

Lowest Valuations

The House voted to suspend the government’s $16.4 trillion borrowing limit until May 19, when the measure would allow the U.S.’s borrowing authority to automatically be increased to accommodate the amount the Treasury borrowed during those three months.

The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, increased 0.4 percent to $30.43, the highest level since Jan. 4. The RTS Volatility Index, which measures expected swings in the stock futures, declined 0.4 percent to 21.04

Standard & Poor’s GSCI Index was little changed at 661.83.

The Micex trades at about 5.7 times estimated earnings and has added 4.3 percent this year. That compares with a multiple of 11 times for the MSCI Emerging Markets Index, which has gained 2.1 percent this year.

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

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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