Russian equities declined for the first time in five days as power stocks retreated amid wagers their earnings will founder and coking-coal producer OAO Mechel (MTLR) sank for a second day.
The Micex Index (INDEXCF) slid 1 percent to 1,496.43 by 1:26 p.m. in Moscow, paring a 3 percent gain in the previous four days. Utilities fell 1.8 percent on average, the biggest declining group on the gauge. OAO Inter RAO UES slumped 4.2 percent to 0.77 kopeks. Mechel dropped 2 percent to 69.70 rubles.
Inter RAO is the worst performer on the Micex this year with a 69 percent drop. MSCI Inc.’s Russia Utility index has slumped 51 percent this year on concern earnings will suffer from a tariff freeze imposed by the government next year. Mechel is seeking new debt covenants for the next two years and is asking lenders to set a ratio of 10 times net debt to earnings before interest, taxes, depreciation and amortization at the end of 2014, Vedomosti reported yesterday.
“You can’t say anything positive about utilities these days,” Vadim Bit-Avragim, who helps manage about $4.4 billion at Kapital Asset Management in Moscow, said by phone. “The companies have invested money, while the government decided to freeze tariffs to limit inflation.”
Mechel, whose net debt was $9.55 billion as of June 1, has as much as $2.48 billion coming due next year, according to a June presentation on its website. The stock plunged 41 percent on Nov. 13, the most on record.
“It’s very hard to talk about its financial recovery in an environment where demand for coal is falling,”Bit-Avragim said.
OAO Russian Grids dropped 3.2 percent to 68.6 kopeks. Federal Grid Co. retreated 2.8 percent to 7.75 kopeks. OAO Uralkali, the world’s biggest potash producer, fell 2.1 percent to 172.16 rubles.
Russian growth of 1.5 percent to 2 percent a year is a structural slowdown as opposed to a cyclical one, central bank Chairman Elvira Nabiullina said today. The country’s equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.3 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index.
The RTS Index (RTSI$) retreated 1.2 percent to 1,438.32.
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