Russian stocks fell for the third day as investors bet the nation’s central bank may refrain from cutting rates as inflation remains above target.
The benchmark Micex Index (INDEXCF) dropped 0.7 percent to 1,382.20 by 12:09 p.m. in Moscow, bringing the three-day decline to 1.2 percent. OAO Uralkali, the world’s biggest potash producer by output, lost 1.3 percent to 149.83 rubles.
Bank Rossii will hold a rates meeting on Aug. 9 after keeping its main lending rates unchanged for a 10th month in July, as policy makers wait for inflation to drop within the target range of 5 percent to 6 percent. Federal Reserve Bank of Dallas President Richard Fisher said yesterday the U.S. central bank is closer to slowing its bond buying program and warned investors not to rely on the stimulus that triggered a rally in emerging assets.
“The majority of market players don’t expect a rate cut on Friday since we’re still above the inflation target,” Yaroslav Lissovolik, Moscow-based head of research at Deutsche Bank AG, said by phone. “It’s still too early to cut rates and the market also fears that the Fed will start curbing its stimulus program.”
Bank Rossii will leave the refinancing rate at 8.25 percent at this week’s meeting, according the median estimate of 19 economists in a Bloomberg survey. Russia’s inflation rate dropped to 6.5 percent in July from a year earlier, the slowest pace in eight months and compared with 6.9 percent in June, the Federal Statistics Service in Moscow said yesterday.
Elvira Nabiullina, who took over as head of the central bank on June 24, is offering banks longer and cheaper funds to help funnel cash into the economy and boost growth. Above-target increases in the cost of living have hampered the bank’s ability to head off the slowdown, even as economic growth slumped in the first half to a four-year low of 1.7 percent.
The Micex tumbled the most in a year on May 23, the day after Fed Chairman Ben S. Bernanke said the central bank could reduce the pace of its asset purchases if officials see signs of sustained improvement in growth. The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates. The U.S. non-manufacturing index beat estimates for July, data released yesterday showed.
Russia’s July Services Purchasing Managers’ Index retreated to the lowest since Aug. 2010, HSBC Holdings Plc said in a report yesterday. Russia receives about half of its budget revenue from oil and natural gas sales.
Uralkali dropped 1.1 percent to $22.69 in London, the second day of declines. The company said on July 30 it would halt a venture with a Belarusian potash miner that controlled exports from the former Soviet Union, ending production restrictions that underpinned global prices and triggering a selloff in fertilizer producers’ shares. The stock has slumped 41 percent in London this year.
M.video, Russia’s largest electronics retailer, tumbled 3.9 percent to 275 rubles after jumping the most in more than a year yesterday. OAO Inter RAO Ues retreated 1.7 percent to 1.27 kopeks, while OAO RusHydro lost 1.6 percent to 56.87 kopeks. EON Russia, controlled by Germany’s biggest utility, fell 3.1 percent to 2.6229 rubles.
Utilities were the biggest declining group on the broader gauge, losing 1.7 percent on average.
Russian equities have the cheapest valuations based on estimated earnings among 21 emerging economies tracked by Bloomberg. The measure trades at 5.2 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.
The dollar-denominated RTS Index (RTSI$) dropped 0.9 percent to 1,321.40, the second day of declines. The volume of shares traded on the Micex was 41 percent below the 30-day average, data compiled by Bloomberg show.
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