Russian Stocks Slip After Rally Sends Valuations to 6-Month High

Russian stocks declined, paring a third week of gains, amid concern the highest Micex (INDEXCF) Index valuations in six months aren’t justified.

The Micex slid less than 0.1 percent to 1,486.77 by 3:29 p.m. in Moscow, trimming its advance this week to 3 percent. The 1.5 percent rally yesterday sent the index to 4.3 times 12-month estimated earnings, the most since March 15. OAO Severstal, a Russian steelmaker, declined 0.7 percent to 302.90 rubles and lost 0.2 percent to $9.545 in London.

This week’s advance in the Micex sent the 14-day relative strength index to 71.98 yesterday, above the level of 70 that suggests to some analysts that a security has been overbought and is poised for a decline. Crude oil, Russia’s main export earner, retreated for a second day in New York as the threat of energy supply disruption from military strikes against Syria receded.

“The Russian market gained a lot yesterday,” Andrey Vashevnik, chief investment officer for Russian markets at R&B Russia Investment Fund Ltd, said by phone. “Today there are concerns in the market that perhaps the U.S. economic recovery isn’t as strong as we had thought.”

The world’s biggest economy needs to show more evidence economic progress will be sustained before the U.S. Federal Reserve can pare its $85 billion in monthly purchases of Treasury and mortgage debt, the central bank said Sept. 18. Crude slipped 0.2 percent to $106.16 in New York.

Trading Volumes

The dollar-denominated RTS Index dropped 0.6 percent today after closing yesterday 19.9 percent above this year’s low on June 24.

Average trading volume on the Micex was about 33 percent below the 10-day average today, data compiled by Bloomberg show. Ten-day price swings subsided to 15.79.

Polymetal International Plc, a Russian gold and silver miner, lost 3.7 percent to 355.68 rubles after surging 7.3 percent yesterday.

The ruble weakened 0.4 percent to 31.763 against the dollar, snapping ten days of gains. Most metals dropped in London today, including nickel and tin. OAO Mechel (MTLR), Russia’s biggest coking-coal producer, fell 1.6 percent to 111.40 rubles after rising 2.1 percent yesterday.

OAO Novorossiysk Commercial Sea Port rose 3.5 percent to 3.4989 rubles. Vedomosti reported today that UralSib Bank bought 5 percent of the company’s shares before the government’s planned sale of a 20 percent stake.

Even after this week’s rally, Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg compared with a multiple of 10.8 for the MSCI Emerging Markets Index.

Refinancing Rate

The Micex sank 0.7 percent on Sept. 13 as Russia’s central bank kept the refinancing rate unchanged at 8.25 percent, matching the forecast of 14 out of 22 economists in a Bloomberg survey. Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median estimate for 2 percent.

The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York increased 0.1 percent to a six-month high of 99.74 yesterday. The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, dropped 1.3 percent.

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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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