Russian shares retreated as OAO Pharmstandard, the nation’s biggest drugmaker, dropped after Jefferies International Ltd. cut the stock to the equivalent of sell from buy.
The benchmark Micex Index (INDEXCF) fell 0.7 percent to 1,411.73 by 11:18 a.m. in Moscow. The dollar-denominated RTS Index (RTSI$) lost 0.4 percent to 1,376.55. Pharmstandard declined 2.1 percent to 1,642 rubles. OAO Novatek, Russia’s second-biggest natural gas producer, lost 1.6 percent to 357.97 rubles.
Pharmstandard tumbled 45 percent in London and 34 percent in Moscow from July 8 to July 11 after the company said it offered $630 million for Bever Pharmaceutical Pte Ltd., without disclosing why, and announced the spinoff of its own branded, non-prescription drugs business. The Micex climbed 1.7 percent last week on speculation the U.S. Federal Reserve will keep stimulus in place. Russia’s equities trade at the cheapest valuations based on estimated earnings among 21 emerging economies tracked by Bloomberg.
“We have serious concerns over corporate governance and minority investors’ ability to extract value from recent strategic activity,” Jefferies analysts James Vane-Tempest and Chris Cooper wrote in an e-mailed note today.
Pharmstandard will offer to buy out shareholders who vote against the planned spinoff of its over-the-counter unit for 2,180 rubles a share, equivalent to $16.79 per GDR, the company said. The buyback is capped at 10 percent of the drugmaker’s net asset value and it’s “unlikely” that all dissenting shareholders’ stock will be bought back, according to the Jefferies note.
OAO Gazprom, the nation’s biggest company and natural gas export monopoly, fell 1 percent to 128.40 rubles after a 6.7 percent rally in the five days through July 19, the fourth straight weekly gain.
Crude oil, Russia’s main export earner, added 0.4 percent to $108.53 a barrel in New York, rising for the fourth day. Russia receives about 50 percent of its budget revenue from oil and natural gas sales. Standard & Poor’s GSCI (SPGSCI) Index of commodities advanced 0.2 percent.
The volume of shares traded on the Micex was 21 percent below the 30-day average, data compiled by Bloomberg show, while 10-day price swings rose to 21.29, the highest since June 26. The 50-member Micex’s 4.3 percent decline in 2013 compares with a 4.2 percent increase for India’s benchmark Sensex Index and Brazil’s Ibovespa Index’s (IBOV) 22 percent loss.
The 14-day relative strength index on the Micex subsided to 62 from 66 on July 19. The RSI measures how rapidly prices have advanced or dropped during a specified time period. Readings below 30 indicate a security may be poised to rise, while those above 70 signal a potential drop.
Thirty-eight stocks, or 76 percent, were trading above their 50-day moving average on the Micex on July 19. None closed at a 52-week low and one at a 52-week high, according to data compiled by Bloomberg. The Russian Volatility Index, which measures expected swings in RTS futures, rose 2.6 percent today. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. added 0.6 percent to 92.59 on July 19.
The Micex trades at 5.3 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.
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