Russian stocks fell the most in developing markets on concern deposits and loans in Cyprus that Moody’s Investors Service said total $60 billion will be affected by an unprecedented levy on savings accounts to pay for the island nation’s bailout.
The Micex Index declined 2.2 percent to 1,462.82 by the close in Moscow, the biggest one-day loss since Nov. 13 and the most among 21 emerging markets tracked by Bloomberg. The dollar-denominated RTS Index (RTSI$) fell 2.8 percent to 1,494.30. VTB Group, Russia’s second-biggest lender, slumped 5.3 percent. OAO Sberbank, the nation’s largest lender with a 14 percent weighting on the Micex, retreated 3.8 percent.
Cypriot President Nicos Anastasiades agreed to demands from euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. Russian (INDEXCF) lenders and companies had about $31 billion placed in Cypriot banks or their own units at the end of 2012, according to a report from Moody’s March 13. The remaining $29 billion in exposure comes in Russian bank loans to Cypriot companies of Russian origin, the ratings company said.
“It’s no secret that the Russians have a major exposure to Cyprus deposits,” Stanislav Kopylov, who helps manage about $3.4 billion at UralSib Asset Management in Moscow, said by phone. “Bank shares are especially sensitive today. Foreign investors will be selling Russia today because of its big exposure to Cyprus.”
The ruble weakened 0.6 percent to 30.8350 per dollar. The country’s dollar bonds due in April 2042 were steady at 4.734 percent.
A double-tax avoidance treaty and lower tax rates have made Cyprus a conduit for Russians moving money into and out of their country. Cyprus is both the biggest direct investor into Russia and the biggest recipient of Russian investment abroad, according to Russian central bank data.
Russian President Vladimir Putin criticized the penalty imposed on Cyprus bank deposits, which the European Union demanded as part of a bailout plan, saying it sets an “unfair, unprofessional and dangerous” precedent.
Russia may reconsider its role in the Cyprus bailout because it wasn’t consulted over the bank tax, state news service RIA Novosti reported, citing Finance Minister Anton Siluanov.
VTB appears “most exposed” to Cyprus’ credit crisis because it has a large subsidiary in the nation with assets of $13.8 billion, Moody’s analysts said in the report. Financial shares led the declines among nine industry groups on the Micex, losing 4.1 percent on average.
Oil, Russia’s main export earner, lost 0.2 percent to $93.25 a barrel in New York. Crude and natural gas account for about 50 percent of Russia’s budget revenue.
The number of shares traded on the Micex was 74 percent above the 30-day average and 10-day price swings surged to 15.892, the highest level since Jan. 18, data compiled by Bloomberg show.
OAO Mechel (MTLR), the second-most indebted Russian mining company, rose 5.9 percent to 170.90 rubles, the biggest gainer on the index. Mechel (MTLR) is seeking financing for its Elga coal field from state development bank Vnesheconombank, VEB spokeswoman Ekaterina Grishkovets said March 15.
The company, whose debt is about four times market value, won an extension on loans from VTB last year, while OAO Gazprombank, a unit of the gas export monopoly, increased the duration of its credit lines.
Shares of the Moscow Exchange tumbled as much as 7.1 percent before closing down 3.8 percent at 52.93 rubles. The bourse’s stabilization period for the IPO ended March 15, according to an e-mailed statement.
The bourse, which sold shares at 55 rubles apiece in an initial public offering last month, were added to the Micex and RTS indexes with a 0.6 weighting starting today, replacing Bank Vozrozhdenie, according to a statement from the exchange.
“Russia, along with many other emerging markets that are deemed most at risk from a deceleration in global growth, are considered fringe investment themes and will remain so until the threats overhanging the U.S. and EU regions are reduced,” Chris Weafer, Sberbank Investment Research’s chief strategist, said in an e-mailed note.
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, sank 2.5 percent to $28.17 today. The RTS Volatility Index, which measures expected swings in the index futures, fell 0.3 percent to 23.10.
The Standard & Poor’s GSCI Index (SPGSCI) of raw materials lost 0.5 percent to 649.17. The Bloomberg Russia-US Equity Index of the 14 most-traded Russian stocks in the U.S. retreated 2.5 percent today to 97.82.
The Micex trades at about 5.5 times estimated earnings and has lost 0.8 percent this year. That compares with a multiple of 10 times for the MSCI Emerging Markets Index, which dropped 2.4 percent over the same period.
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