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Russia Stocks Pare Weekly Advance as Utilities Fall on Tariffs

Russian equities dropped, paring their gain for the week as power stocks retreated on concern the government will slow tariff increases.

The Micex Index (INDEXCF) lost 0.6 percent to 1,364.18 by 11:16 a.m. in Moscow, poised for a 1.9 percent advance in the week. Utilities led the declines among nine industry groups, trading down 2.3 percent on average. OAO RusHydro, Russia’s biggest renewable energy producer, sank 2.9 percent to 50.09 kopeks, while Federal Grid Co. fell 3.3 percent to 11 kopeks and OAO Russian Grids, formerly known as MRSK Holding, retreated 2.8 percent to 1.143 rubles.

The government is searching for “compromise options” as it reviews planned increases in tariffs for gas, transport and electricity, Deputy Economy Minister Andrei Klepach told reporters today. The Economy Ministry is seeking a 6 percent increase in power tariffs for grid companies for 2014-2015 compared with 9 percent to 10 percent planned earlier, Interfax reported yesterday, citing an unidentified ministry official.

“RusHydro and distribution companies stand to lose the most,” UralSib Capital analysts including Matvey Taits in Moscow wrote in an e-mailed note. “Limiting distribution and transmission tariff growth to 6 percent creates significant risks” for power companies and “will delay the return on capital,” he said.

OAO Gazprom, Russia’s biggest natural gas producer, tumbled 0.9 percent to 121.83 rubles. The Economy Ministry is seeking a 5 percent increase in gas prices for industrial users for 2014-2015 compared with 15 percent earlier, Interfax reported. Gazprom has the second-biggest weighting on the Micex at 15 percent.

Surgut Earnings

Crude oil, Russia’s chief export earner, retreated 0.7 percent to $92.96 a barrel in New York, the first drop in six days.

OAO Surgutneftegas, an oil producer, surged as much as 2.5 percent, trading up 0.9 percent at 28.10 rubles. The company will report earnings based on international accounting standards for the first time since 2001 on April 30, it said on April 24.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The measure trades at 5.1 times its 12-month estimated earnings and has lost 7.8 percent this year, compared with a 10.3 multiple for the MSCI Emerging Markets Index, which has dropped 2.9 percent in the period.

The number of shares traded on the Micex was 1.3 times above its 30-day average, while the gauge’s 10-day price swings subsided to 18.438.

The RTS Volatility Index, which measures expected swings in stock futures, added 0.6 percent to 21.55, the first advance in four days. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, jumped 0.4 percent to 26.37 yesterday, while the Bloomberg Russia-US Equity Index added 0.7 percent to 93.55.

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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