Russia Stocks Retreat 4th Day as World Bank to IMF Cut Outlook
Russian stocks fell for a fourth day as the World Bank and the International Monetary Fund cut their growth forecasts for the world’s biggest energy exporter.
The Micex slid 0.2 percent to 1,462.13 by 1:19 p.m. in Moscow. Polymetal International Plc, a Russian gold and silver miner, tumbled 2.4 percent to 338.33 rubles. OAO Pharmstandard, the country’s biggest drugmaker, declined 1.1 percent to 1,633.10 rubles. OAO Moscow Exchange traded down 2.9 percent to 61.36 rubles.
The World Bank cut its forecast for Russia’s economic growth to 1.8 percent from 2.3 percent in 2013 and reduced it to 3.1 percent from 3.6 percent next year, according to a report today. Russia should avoid higher budget spending in the coming years and refrain from easing monetary policy to keep inflation under control, the International Monetary Fund said in a report yesterday, reducing its prediction for the pace of expansion in 2013 to 1.5 percent from 2.5 percent.
“Russia is trying to stick its finger into one hole and the others start leaking,” Alexei Yazikov, head of research at Aton Capital LLC, said by phone from Moscow. “It’s impossible to diversify Russia’s economy quickly, it would take years. Cutting rates is useless, it’s like offering help to a dead man.”
Russia should focus on supporting startup companies instead of small and medium-sized businesses to diversify the economy, the World Bank said. The comments feed into a government debate over how to steer the $2 trillion economy out of its sharpest slowdown since 2009, with the central bank spurning calls by senior officials for lower borrowing costs by holding its main lending rates for a year.
The Micex (INDEXCF) 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. The nation’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 growth.
Gross domestic product will rise 1.8 percent this year, the Economy Ministry said last month, trimming its April forecast for a 2.4 percent advance.
Crude added 0.3 percent to $103.44 in New York, the first gain in five days. Russia receives about half of its budget revenue from the oil and natural-gas industries.
Average trading volume on the Micex was about 46 percent below the 30-day average today, data compiled by Bloomberg show. Ten-day price swings fell to 16.172. The dollar-denominated RTS Index dropped 0.3 percent to 1,442.81.
The country’s stocks jumped last week 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 10.6 for the MSCI Emerging Markets Index.
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