Russian equities dropped for a fourth day, the longest losing streak in three weeks, as foundering growth crimped demand for stocks in the world’s biggest energy exporter.
The Micex Index (INDEXCF) sank 0.4 percent to 1,369.22 by 12:22 p.m. in Moscow, the lowest since Aug. 8 on a closing basis. OAO Rostelecom, Russia’s biggest fixed-line operator, retreated 1.5 percent to 109.33 rubles, poised for the weakest level since July 15, after Bank of America Merill Lynch cut the stock to the equivalent of sell.
Russia lowered its 2013 economic-growth forecast for the second time this year to 1.8 percent from 2.4 percent, Deputy Economy Minister Andrey Klepach said on Aug. 26. Renaissance Capital reduced Russia’s 2013 GDP growth forecast to 2.2 percent. The MSCI Emerging Markets Index tumbled 0.6 percent, retreating for the second day as foreign investors sold holdings in Southeast Asia and oil prices surged on concern the U.S. will take military action in Syria.
“The Russian economy is a cause for caution,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “The absence of innovations in the economy and the large spread of monopolies in major sectors is the primary cause.”
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 to London-based Capital Economics Ltd.
The central bank refrained from cutting interest rates for an 11th month on Aug. 9, while highlighting “significant” risks to growth.
“Change of governor at the CBR has unfortunately not yet led to a much-needed, in our view, rate-cutting cycle,” Ivan Tchakarov, Renaissance Capital’s chief Russia economist in Moscow, said in an e-mailed note.
Rostelecom’s merger with Svyazinvest, the rollout of its mobile network and potential buyout of Tele2 Russia may increase capital expenditures, leverage and divert management, Bank of America Merill Lynch analysts said in the e-mailed report.
M.Video, Russia’s biggest electronics retailer, surged as much as 4.6 percent, trading up 1.1 percent at 251.74 rubles. Sales in the first half jumped 14 percent from a year earlier to 78.5 billion rubles ($2.4 billion), the company said today in a statement.
Shares of OAO Mechel (MTLR), Russia’s biggest coking coal producer, dropped 1.3 percent to 100.30 rubles, falling for the second day.
Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg at 5.1 times 12-month estimated earnings, compared with a multiple of 9.7 for the MSCI Emerging Markets Index. The dollar-denominated RTS Index (RTSI$) fell 0.3 percent to 1,300.00.
Crude oil futures added 1 percent to $110.14 a barrel in New York. Brent advanced 1.1 percent to $115.59 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 33 percent above the 30-day average today, while 10-day price swings subsided to 11.8, the lowest since July 31, data compiled by Bloomberg show.
The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York dropped 1.2 percent to 90.79 yesterday, while the Market Vectors Russia (RSX) ETF, the largest dedicated Russian exchange-traded fund, fell 1.5 percent to $25.89.
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