LSR Group (LSRG), a Russian property developer, OAO Inter RAO UES, a state-run power company, and OAO TMK fell as they were cut from an index at MSCI Inc. (MSCI), whose gauges are tracked by investors managing about $7.5 trillion.
LSR headed for the biggest drop in more than four months, losing 4.5 percent to 560.50 rubles by 12:43 p.m. in Moscow. The amount of shares traded was about 1.5 times the three-month average. Inter RAO slumped 4 percent to 0.85 kopeks, the lowest level since March 2009. Volume was almost double the three-month average. TMK, the world’s largest maker of pipes for the oil and gas industry by volume, slid 2 percent to 86.56 rubles.
The three stocks were removed by MSCI in its Russia index rebalancing announced late yesterday. Combined passive fund outflows may exceed $35 million, while active funds may lose as much as $100 million as a result of the cuts, Sberbank CIB analysts said in an e-mailed note today. The rebalancing changes take effect after the close on Nov. 26.
“The move we’re seeing now is purely technical since passive and active fund managers need to adjust their positions,” Joseph Dayan, head of markets at BCS Financial Group in London, said in e-mailed comments. “There are, however, longer-term implications since these stocks fall out of the investable universe. Falling out of the index dramatically reduces the potential bid for the stock.”
OAO Moscow Exchange, which was added by MSCI with a 0.52 percent weighting, jumped as much as 1.7 percent before trading up 0.1 percent at 61.08 rubles. The stock has risen 11 percent since its February initial public offering. Inflows into Moscow Exchange shares after the addition may reach as much as $25 million for passive funds, and as much as $75 million for active funds, according to Sberbank CIB.
Inter RAO is the worst performer on the Micex this year after losing 66 percent, while TMK has declined 5.4 percent in the period.
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