Micex Index Falls Second Day as JPMorgan Cuts Russia on Crude

Russian stocks fell for a second day as JPMorgan Chase & Co. reduced the nation’s equities to the equivalent of sell on declining crude prices.

The Micex (INDEXCF) slid 0.6 percent to 1,467.62 by the close in Moscow. OAO Rosneft, Russia’s biggest oil producer, dropped 1.3 percent to 259.62 rubles. Steelmaker OAO Severstal sank 2.2 percent to 293.20 rubles, while OAO Mechel (MTLR), Russia’s biggest coking coal producer, retreated 3.4 percent to 107.50 rubles.

JPMorgan cut its weighting of Russian equities to underweight, citing a drop in the crude price as the risk of U.S. military action in Syria fades. Oil has averaged $105.90 a barrel in New York this quarter amid concern an attack may distrupt supplies, helping the benchmark index of the world’s biggest energy exporter gain 11 percent since June. Crude lost 1 percent to $103.61 today.

“We’ve seen the Micex gain a lot this quarter, we were expecting a slight correction, but valuations remain attractive,” Dmitri Kryukov, the chief investment officer at Verno Capital, said by phone from Moscow. “Oil has been declining for the past few days.”

OAO Uralkali fell the most on the Micex, losing 4.7 percent to 170.15 rubles. Russian President Vladimir Putin and Belarus counterpart Aleksandr Lukashenko “briefly” discussed the potash producer today, Kremlin spokesman Dmitry Peskov said in Sochi, without elaborating.

Uralkali Retreats

Uralkali’s Chief Executive Officer Vladislav Baumgertner was arrested in Minsk on Aug. 26, a month after he pulled out of a Belaruskali trading venture with Belarus. Baumgertner will probably be handed over to Russia soon, Kremlin foreign-policy aide Yuri Ushakov told reporters on Sept. 20. Uralkali sank 2.7 percent to $27.25 in London.

OAO Moscow Exchange fell 1 percent to 62.41 rubles. Goldman Sachs Group Inc. removed the bourse from its central and eastern Europe, Middle East and Africa focus list, according to a note today.

Moscow Exchange shareholders will vote at a Nov. 14 extraordinary meeting in Moscow on whether to approve the buyback of a 4.2 percent stake, the bourse said in a statement on Sept. 19 after the market close. The exchange plans to buy the shares at 55 rubles apiece, allowing stockowners as of Sept. 25 to participate in the plan, it said. The company will buy the shares from its unit, OOO Micex Finance, after which it will cancel them, it said.

Polymetal International Plc (POLY), a Russian gold and silver miner, retreated 4.6 percent to 332 rubles, a second day of declines.

Alrosa Surges

OAO Alrosa, the world’s biggest diamond miner by output, added 1.7 percent to 35.107 rubles, the biggest advancer. The company may sell a 14 percent stake in October, two people with direct knowledge of matter said on Sept. 17.

Average trading volume on the Micex was about 11 percent below the 30-day average today, data compiled by Bloomberg show. Ten-day price swings climbed to 16.184. The dollar-denominated RTS Index dropped 0.8 percent to 1,451.43. The gauge closed 19.9 percent above this year’s low on June 24, 0.9 index point short of a bull market, after the U.S. Federal Reserve unexpectedly decided against reducing monetary stimulus.

Even after last week’s 2.5 percent rally, Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg. The Micex Index’s 12-month estimated price-to-earnings ratio was at 4.3 today, compared with a multiple of 10.7 for the MSCI Emerging Markets Index.

The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York fell 0.5 percent today, while the Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, dropped 0.6 percent. The ruble strengthened 0.1 percent to 36.8721 against the dollar-euro basket today.

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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