Russia Stocks Drop Third Day as VTB Slide Outweighs Power Shares

Russian equities fell for a third day as VTB Group, the nation’s second-biggest lender, retreated, offsetting a rally in power stocks.

The Micex Index (INDEXCF) retreated 0.1 percent to 1,415.24 by 11:20 a.m. in Moscow after rising 0.3 percent earlier. Utilities added 2.9 percent on average. OAO Russian Grids, formerly known as MRSK Holding, surged 5 percent to 1.366 rubles. OAO Inter RAO UES added 4.2 percent to 1.35 kopeks, while Federal Grid Co. increased 3.8 percent to 12.47 kopeks.

VTB, Russia’s second-biggest lender, led declines on the gauge, retreating 2.1 percent to 4.69 kopeks. The stock rose 9.4 percent from April 29, when it announced that investors had agreed to buy all $3.3 billion of the shares it’s selling to increase capital, through May 10.

“It’s mostly a technical move,” Luis Saenz, head of equity sales and trading at BCS Financial Group, said by e-mail. “Some fund managers are participating in the SPO and trimming their current holding in order to manage the notional exposure.”

The pre-emptive rights offering for VTB’s local shares closes on May 17 and tomorrow for its depositary receipts, Saenz said in an e-mailed note yesterday.

MSCI Inc. is due to announce the results of its semi-annual index rebalancing for its Russia index on May 15, with the changes scheduled to take effect on June 3.

The number of shares traded on the Micex was 108 percent above its 30-day average, while the gauge’s 10-day price swings rose to 17.031.

Cheapest Valuations

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.3 times 12-month estimated earnings and has lost 3.8 percent this year, compared with a 10.5 multiple for the MSCI Emerging Markets Index, which has dropped 1 percent in the period.

The dollar-denominated RTS Index (RTSI$) added 0.4 percent to 1,428.60. The RTS Volatility Index, which measures expected swings in stock futures, lost 0.8 percent to 20.38. The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, slid 1.1 percent to $27.32 in New York yesterday.

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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