Russia Stocks Decline 3rd Day as Uralkali Drops on CEO Arrest

Russian stocks dropped for a third day as OAO Uralkali led declines after a report the company’s chief executive officer will be held on abuse of office charges in Belarus for at least two months.

The Micex Index (INDEXCF) fell 0.6 percent to 1,378.59 by 11:07 a.m. in Moscow. Uralkali, the world’s biggest potash producer, sank for a second day, losing 2.3 percent to 154 rubles.

Uralkali CEO Vladislav Baumgertner was charged yesterday in Minsk in his capacity of chairman of Belarusian Potash Co., a joint venture that controlled more than 40 percent of global exports, Pavel Traulko, spokesman for the Belarus Investigative Committee said yesterday. Uralkali quit the venture last month. Baumgertner has been arrested for two months and is being questioned, Interfax reported today, citing Traulko. Uralkali’s press office declined to comment on the report by phone.

“Uralkali will continue to fall -- it’s hard to imagine what’ll happen next,” Vasiliy Tanurkov, an analyst at Veles Capital in Moscow, said by phone. “Belarus didn’t like Uralkali’s decision to pull out of the joint venture because the business had major significance for the state budget.”

Baumgertner’s arrest may be extended during the investigation, Interfax reported. Uralkali sank 19 percent on July 30 after announcing its split from BPC.

Sberbank, Mechel

OAO Sberbank, Russia’s largest lender, declined for the third day, losing 1 percent to 90.38 rubles. The stock tumbled 2 percent to $10.86 in New York trading yesterday. Sberbank, which is scheduled to report earnings on Aug. 28, held 46 percent of Russia’s deposits last year, according to Deposit Insurance Agency data.

Shares of OAO Mechel (MTLR), Russia’s biggest coking coal producer, dropped 1.4 percent to 102.70 rubles. The stock surged to the highest since May 31 yesterday as President Vladimir Putin proposed a 10-year mineral extraction tax break for greenfield coal projects.

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 9.8 for the MSCI Emerging Markets Index. The dollar-denominated RTS Index (RTSI$) fell 1 percent to 1,311.01.

Russia reduced this year’s growth estimate to 1.8 percent from 2.4 percent, Deputy Economy Minister Andrey Klepach said by phone yesterday. Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median forecast of 2 percent of economists surveyed by Bloomberg. That may mean the nation has entered its second recession in five years, according London-based to Capital Economics Ltd.

Crude Gains

Crude oil futures added 0.2 percent to $106.15 a barrel in New York. Brent crude advanced 0.2 percent to $110.94 a barrel in London. Russia receives about half of its budget revenue from oil and natural gas sales.

The volume of shares traded on the Micex was 58 percent below the 30-day average today, while 10-day price swings subsided to 15.8, the lowest since Aug. 8, data compiled by Bloomberg show.

The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York dropped 1 percent to 91.90 yesterday, while the Market Vectors Russia (RSX) ETF, the largest dedicated Russian exchange-traded fund, fell 1.5 percent to $26.29.

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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