Russian shares dropped for a second day on concern commodities may extend their decline, curbing growth in the world’s biggest energy exporter.
The Micex Index (INDEXCF) fell 1.4 percent to 1,317.20 by 11:31 a.m. in Moscow, the sharpest slide in almost a week. Basic materials companies led the retreat, losing 1.5 percent on average. The volume of shares traded on the gauge was 50 percent below the 30-day average, while 10-day price swings subsided to 16.497.
The Standard & Poor’s GSCI (SPGSCI) gauge of 24 raw materials retreated 0.5 percent as the Bank of Japan disappointed investors by failing to expand monetary stimulus and concern grew that the U.S. Federal Reserve will scale back debt purchases. Russian central bank Chairman Sergey Ignatiev, who presided yesterday over his last policy meeting after leading the regulator for more than a decade, kept key rates on hold for a ninth month.
“The market is falling on fears that we’re entering the end of the commodity cycle, that the rise of commodities is over,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “Russia is very closely correlated to oil.”
The S&P GSCI Index is down 3.6 percent this year. The RTS will decline to 1,250 over the next twelve months as oil falls 5 percent a year, according to a note from Sberbank CIB analysts today. Rapid, investment-led growth in China is over, signaling the end of the “commodity supercycle” and implying a stronger dollar and weak commodity-market performance, according to Sberbank analysts.
Bank Rossii’s refinancing rate was held at 8.25 percent, the regulator said in a statement on its website yesterday. That matched the median estimate in a Bloomberg survey of 26 economists, with four predicting a quarter percentage point cut. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months, according to data last week.
The rates decision means that completing an easing cycle Ignatiev announced in April will fall to his successor, Kremlin economic aide Elvira Nabiullina, who takes over in two weeks.
The Micex tumbled the most in a year on May 23, the day after Federal Reserve Chairman Ben S. Bernanke suggested the central bank could curtail its bond buying if the job market improves in a “real and sustainable way.” The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates.
Russia’s Economy Ministry lowered this year’s growth forecast to 2.4 percent from 3.6 percent in April.
Crude, which together with natural gas contributes about 50 percent of Russia’s budget revenue, traded down 0.5 percent at $95.28 a barrel. A government report tomorrow is forecast to show U.S. stockpiles increased while refinery run rates advanced a second week.
Brent for July settlement fell 0.6 percent to $103.36 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s major export blend, declined 0.5 percent to $102.43.
The country’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 4.9 times its 12-month estimated earnings, having lost 10 percent this year, compared with a multiple of 10 for the MSCI Emerging Markets Index, which is down 9.9 percent.
The Russian Volatility Index advanced 3.6 percent to 29.16. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. fell 1.4 percent to 85.93 yesterday.
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