Russia Stocks Fall Fifth Day as PhosAgro to NLMK Drop on MSCI

Russian equities dropped for the fifth day as crude oil declined and stocks from OAO PhosAgro to OAO Novolipetsk Steel tumbled after MSCI Inc. (MSCI) announced its semi-annual rebalancing results.

The Micex gauge retreated 0.5 percent to 1,385.59 by 11:32 a.m. in Moscow. PhosAgro, Russia’s biggest fertilizer producer, traded down 5.1 percent at 1,276 rubles. OAO Russian Grids, formerly known as MRSK Holding, slumped 5.9 percent to 1.279 rubles. Novolipetsk dropped 4 percent to 45.91 rubles, while its global depositary receipts fell 3.6 percent to $14.67 in London.

Russian Grids was excluded from the MSCI Russia Index along with Novolipetsk’s GDRs, according to yesterday’s statement from MSCI. VTB Capital and Sberbank CIB expected PhosAgro to be added to MSCI Russia after PhosAgro’s controlling holders, Andrey Guryev and his family, sold a 9 percent stake in the fertilizer producer in April to gain entry to the index.

“Rather surprisingly, PhosAgro was not included” in the gauge, Sberbank CIB’s analyst Iskander Abdullaev, said in an e-mailed note. “Russian Grids was removed from the headline index due to falling outside the market cap requirements as a result of poor performance since November.”

Russian Grids has fallen 40 percent over the past 12 months. Funds that track MSCI indices readjust their portfolios based on the changes before the rebalancing takes effect on June 3.

Crude oil, Russia’s chief export earner, slipped 0.9% percent to $93.43 a barrel in New York. Russia receives about half of its budget revenue from oil and natural gas sales.

MSCI Rebalancing

MSCI announced the results of its rebalancing after the market closed yesterday, with changes scheduled to take effect on June 3.

OAO Mechel (MTLR), Russia’s biggest coking-coal producer, declined 2 percent to 114 rubles. The American depositary receipts lost 3.4 percent to $3.68 yesterday. MSCI cut the company’s depositary receipts from its Russia Index, according to its statement.

The volume of shares traded on the Micex was 3.1 percent above the gauge’s 30-day average, while the index’s 10-day price swings rose to 17.479.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.1 times its 12-month estimated earnings and has lost 6.3 percent this year, compared with a 10.6 multiple for the MSCI Emerging Markets Index, which has dropped 0.8 percent in the period.

The dollar-denominated RTS Index (RTSI$) fell 0.4 percent to 1,385.42. The RTS Volatility Index, which measures expected swings in stock futures, lost 0.7 percent to 21.25. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. slipped 0.6 percent to 93.77 yesterday. The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, tumbled 0.8 percent to 27.08 in New York.

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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