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Russian Stocks Extend Longest Losing Streak Since May on Rates

Russia’s Micex Index (INDEXCF) extended its longest losing streak since May as investors speculated Bank Rossii will leave its main lending rates unchanged tomorrow and OAO GMK Norilsk Nickel declined to its lowest since 2009.

The benchmark Micex Index slipped less than 0.1 percent to 1,362.38 for a fifth day of declines. Nickel and palladium producer Norilsk fell by 3.6 percent to 4,106 rubles, the lowest since December 2009. VTB Group, the country’s second-largest bank, lost 1.5 percent in Moscow.

The central bank will keep the refinancing rate at 8.25 percent at the meeting in Moscow, according the median estimate of 20 economists in a Bloomberg survey. The main lending and deposit rates will also be unchanged, two separate surveys show. Bank Rossii left the main 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.

“I doubt that we’ll see a rate cut tomorrow,” Stanislav Kopylov, who helps manage about $3 billion at UralSib Asset Management in Moscow, said by phone. “Bank shares are sensitive to the stimulus speculation; the market would receive a boost if the central bank cut its main rates.”

Russia’s inflation fell to 6.5 percent in July from a year earlier, the slowest pace in eight months, compared with 6.9 percent in June, the Federal Statistics Service in Moscow said on Aug. 5.

Financial Shares

Financial shares led the decline among nine industry groups on the Micex, retreating 0.6 percent on average.

Elvira Nabiullina, who took over as head of the central bank on June 24, is offering lenders 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 a slowdown, even as economic growth slumped in the first half to a four-year low of 1.7 percent.

Brent crude, Russia’s main export earner, decreased for fifth day, falling 1.4 percent to $105.89 a barrel in London. Russia receives about half of its budget revenue from oil and natural gas sales.

Chinese exports climbed 5.1 percent in July, after falling the previous month, the government reported today. The nation’s thirst for commodities has made it the biggest global buyer of industrial metals and the largest energy consumer.

Cheapest Valuations

Norilsk Nickel (GMKN), the world’s largest nickel producer, retreated 3.4 percent to $12.42 in London.

“In Norilsk we clearly see week-long selling from one or several large holders with additional activity from short sellers,” Kirill Yankovskiy, director of equity sales at UralSib Capital in London, said by e-mail.

Norilsk may cut the 2013 dividend as nickel is trading close to four-year lows, Chief Executive Officer Vladimir Potanin said in an interview with Norilsk TV channel on July 25.

“The pressure is clearly on the individual stock as other mining companies are feeling better,” Yankovskiy said.

The dollar-denominated RTS Index (RTSI$) rose 0.2 percent. Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg at 5.2 times 12-month estimated earnings, compared with a multiple of 10.7 for the MSCI Emerging Markets Index.

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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