Russian stocks, down for a third month in New York, will extend declines as the slowest economic growth since 2009 curbs investors’ appetite for the country’s equities, according to Otkritie Financial Corp. and UralSib Financial Corp.
The Bloomberg Russia-US Equity Index gained 1.1 percent in New York yesterday, trimming the drop in April to 3.2 percent. The gauge of the most-traded Russian companies in the U.S. has lost 11 percent during the past three months. Futures (VEA) on Moscow’s dollar-denominated RTS Index rose 0.2 percent to 137,450 in U.S. hours yesterday.
Russia’s economy expanded 2.1 percent in the fourth quarter, the least since a 2009 recession, while inflation almost doubled to 7 percent in the past 12 months. American depositary receipts of Mechel led declines among U.S.-traded Russian stocks in April, tumbling 19 percent, while OAO RusHydro (RSHYY) slid 11 percent. State-backed oil producer OAO Rosneft’s treatment of minority shareholders is also deterring investment, according to Moscow-based Otkritie.
“There is an overall negative mood toward the Russian market, as the economy is slowing while inflation remains high,” Slava Smolyaninov, chief strategist at Moscow-based brokerage UralSib, said in a phone interview yesterday. “That negative perception toward Russia will continue until it manages to stabilize economic growth and demand for commodities improves globally.”
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, increased 1.4 percent to $26.74 yesterday, trimming its monthly drop to 3.6 percent. The gauge fell for a third month. The RTS Volatility Index, which measures expected swings in the stock futures, increased 1.7 percent to 21.09 points.
The Micex Index (INDEXCF) gained 1.7 percent to 1,385.88 in Moscow yesterday, paring its April decline to 3.7 percent. The gauge lost 10 percent since the end of January. Russian markets are closed for holidays today.
Policy makers cut Russia’s growth forecast to 2.4 percent this year, compared with 3.6 percent expected earlier. Russia is probably already in a recession and monetary policy should be eased to ignite growth, Ksenia Yudaeva, President Vladimir Putin’s representative to the Group of 20 nations, said in an April 16 interview in New York.
Commodities made up more than 80 percent of Russia’s export revenue in 2011, according to government data, while oil and natural gas account for about 50 percent of the nation’s budget revenue.
The Standard & Poor’s GSCI Index of 24 raw materials fell 0.9 percent to 624.44 yesterday, widening its drop last month to 4.7 percent, the steepest decline since May 2012.
OAO Mechel (MTL), Russia’s biggest producer of steelmaking coal, slipped 0.5 percent to $4.08 yesterday. The Moscow-based company has fallen a fourth month, its longest stretch of retreats since the five months to January 2009.
OAO RusHydro gained 4.3 percent to $1.70 yesterday, the highest level since April 5. The nation’s largest renewable energy producer has plunged 33 percent since the end of January.
Yandex NV (YNDX), the biggest Internet company in Russia, fell less than 0.1 percent to $25.74 yesterday, trimming its advance last month to 11 percent. Yandex, based in The Hague, was the biggest gainer on the Bloomberg Russia-US gauge last month.
Rosneft, the world’s largest publicly traded crude producer, closed its $55 billion takeover of BP Plc (BP/)’s TNK-BP Russian unit on March 21, sending shares of TNK’s traded unit, OAO TNK-BP Holding (TNBP), to a record low on March 26 after announcing plans to borrow money from the company.
“Investors are selling because of the way they are being treated by Russia’s major companies,” Vladimir Tikhomirov, chief economist at Otkritie Financial Corp, said by phone from Moscow yesterday. “When such a heavyweight as Rosneft mistreats its minority shareholders, it has a huge impact on the investment climate in the country.”
Futures expiring in June on Russia’s ruble showed the currency gaining 0.4 percent to 31.93 per dollar, after falling 0.6 percent to 31.1210 in Moscow yesterday. The currency declined 0.9 percent to 35.5441 against the dollar-euro basket used by the central bank.
Crude for June delivery decreased 1.1 percent to $93.46 a barrel on the New York Mercantile Exchange yesterday, widening its monthly drop to 3.9 percent and falling for a second time in three months. Brent oil for June settlement declined 1.4 percent to $102.37 a barrel on London’s ICE Futures Europe exchange, losing 7 percent last month, the biggest drop since May 2012. Urals crude, Russia’s major export blend, decreased 1.3 percent to $101.02, widening its drop last month to 6.1 percent.
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