Russia Stocks Drop Most in 2 Weeks as GDP Slows, Rosneft Falls

Russian (INDEXCF) stocks retreated from their highest level in 10 months as the country’s fourth-quarter economic growth slowed. Price swings on equities fell to the smallest level in more than two years.

The Micex Index slid 0.8 percent to 1,549.75 by the close in Moscow, the most since Jan. 15, after advancing 1.2 percent yesterday. Of 50 stocks, 35 dropped and 15 gained. The gauge’s 50-day volatility declined to 12.3032, the lowest since November 2010. The dollar-denominated RTS Index (RTSI$) retreated 0.7 percent to 1,623.87. Oil and gas, basic materials and consumer services shares on the Micex slipped at least 0.9 percent.

Russia’s fourth-quarter gross domestic product growth slowed to 2.2 percent from a year earlier, Russian Deputy Economy Minister Andrei Klepach said in Moscow today. OAO Rosneft, Russia’s biggest oil producer, dropped the most in more than two months after its recommendation was reduced.

“The volatility has fallen because we’re seeing a temporary ceasefire in the global markets,” Alex Debelov, chief investment officer at Moscow-based Third Rome LLC, which manages about $400 million in Russian assets, said by phone.

Rosneft slid 1.5 percent, the most since Nov. 22, to 271.01 rubles as Sanford C. Bernstein & Co. cut the stock to the equivalent of neutral, citing “limited” share growth potential. The company’s 5.8 percent weighting in the Micex is the fourth-largest.

The number of shares traded on the gauge was 20 percent above the 30-day average, data compiled by Bloomberg show. Standard & Poor’s GSCI Index of commodities climbed 0.3 percent to 667.51 after rising 0.4 percent yesterday.

Severstal, Norilsk

The Russia Depositary Index dropped 0.5 percent. Most metals rose on the London Metal Exchange, including nickel, lead and copper.

Global depositary receipts of OAO Severstal, the steelmaker controlled by billionaire Alexey Mordashov, declined 3.1 percent after the company said output fell in the fourth quarter.

OAO GMK Norilsk Nickel retreated 0.8 percent to 5,971 rubles, falling for a second day. HSBC Holdings Plc cut the stock to neutral from the equivalent of buy, citing price appreciation, according to an e-mailed note. The stock has advanced 6.5 percent this year.

OAO Aeroflot, Russia’s largest air carrier, lost 3.2 percent to 51.60 rubles, the biggest decliner. OAO Mechel, Russia’s biggest coking coal producer, retreated 1.7 percent to 205.30 rubles.

Pharma Stocks

OAO Pharmstandard, Russia’s largest drugmaker, added 2 percent to 1,941.60 rubles, the second-biggest gainer. OAO Pharmacy Chain 36.6, Russia’s biggest drugstore chain, rallied 9.4 percent to 35.87 rubles. The company may issue new shares to raise as much as $300 million for a possible merger with A5 Pharmacy Chain, Kommersant reported today, citing Sergey Solodov, an A5 shareholder, and a person close to 36.6 who it didn’t identify.

The European Central Bank said lenders will this week repay more of its emergency three-year loans than economists forecast, another signal the euro region’s debt crisis may be abating.

Crude oil rose as much as 0.9 percent to $97.32 a barrel in New York. Russia receives about half of its budget revenue from oil and natural gas.

The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, was little changed at $30.93 yesterday. The RTS Volatility Index, which measures expected swings in the stock futures, increased 0.1 percent to 19.64.

The Micex trades at about 5.7 times estimated earnings and has added 5.1 percent this year. That compares with a multiple of 11 times for the MSCI Emerging Markets Index, which has gained 1.3 percent over the same period.

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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