Russian Stocks Retreat as Goldman Cuts Mining Sector After Rally

Most Russian (INDEXCF) equities fell, poised for the first weekly decline in three, as mining stocks retreated after Goldman Sachs Group Inc. (GS) cut the sector to neutral after a price rally. Volatility dropped.

The Micex Index declined less than 0.1 percent to 1,532.74 by 10:42 a.m. in Moscow, poised for a 0.5 percent drop in the week. Of the 50 stocks in the gauge, 19 advanced, two were little changed and 29 slid. The RTS Index (RTSI$), Russia’s dollar- denominated equity gauge, rose less than 0.1 percent to 1,604.81.

United Co. Rusal fell as much as 3.5 percent, the biggest decliner, as Goldman cut the stock to sell, citing a “negative” outlook for aluminum prices in an e-mailed note. OAO Mechel (MTLR), Russia’s buggest coking coal producer, dropped as much as 1.8 percent after Goldman reiterated its sell recommendation, citing “challenging” coal market conditions.

“We downgrade our mining coverage view to neutral from attractive,” Goldman analysts led by Yulia Chekunaeva said in an e-mailed note today. “Cyclical mining stocks largely followed the rally we have seen in the commodities prices.”

The amount of shares traded on the Micex was 47 percent below the 10-day average, data compiled by Bloomberg show. The Micex’s 10-day volatility declined to 10.908, the lowest level since Dec. 28.

Russia Inflows

Crude oil pared declines, trading little changed at $95.96 in New York. Russia receives about half of its budget revenue from oil and natural gas. Standard & Poor’s GSCI Index of Commodities was little changed at 663.61.

Inflows into Russian equity funds over the week ending Jan. 23 were $116 million, according to a note from VTB Capital, citing EPFR Global data.

The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, added 0.2 percent to $30.48, the highest level since Jan. 4. The RTS Volatility Index, which measures expected swings in the stock futures, declined 1.4 percent to 20.16.

The Micex trades at about 5.6 times estimated earnings and has added 3.8 percent this year. That compares with a multiple of 10.8 times for the MSCI Emerging Markets Index, which has gained 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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