Russian shares dropped for a seventh day, poised for the longest losing streak in almost two and a half years, on concern that a weakening ruble will stoke inflation.
The Micex Index (INDEXCF) fell 0.9 percent to 1,449.54 by 1:04 p.m. in Moscow, its seventh day of declines. OAO Magnit, the nation’s biggest food retailer slumped 3.9 percent to 7,927.8 rubles. OAO Sberbank, the nation’s biggest lender with a 13 percent weighting in the index, lost 1.1 percent to 95 rubles. Grocer OAO Dixy Group dropped 1.5 percent to 327.98 rubles.
Russia’s currency slid 0.6 percent against the central bank’s basket of dollars and euros to 41.1356, an all-time low. A weaker ruble encourages Russians to withdraw and convert local-currency deposits, Sberbank’s main source of funding, while hurting retailers by making imports more expensive.
“The ruble is a source of a major concern for stock investors because the best equities, especially consumer-linked companies, were connected to the strong ruble,” Mansur Mammadov, a money manager at Kazimir Partners Ltd. in Moscow, which oversees $300 million in emerging-market equities, said by phone. “People are afraid that inflation will rise and the consumer-spending power will drop.”
The weaker ruble may ignite inflation in Russia, Economy Minister and former central banker Alexei Ulyukayev said yesterday. Consumer prices growth accelerated to a three-month high 6.5 percent in November from 6.3 percent a month earlier, the Federal Statistics Service said Dec. 5.
The ruble posted its worst start of the year since 2009 as Russia’s economy grew 1.2 percent in the third quarter, the weakest expansion in almost four years, while the Federal Reserve’s decision to taper monetary stimulus eroded demand for emerging-market assets.
Fed policy makers reduced the pace of bond buying for a second straight meeting yesterday, even as an emerging-market selloff deepened. The Micex Index advanced an average 77 percent during the Fed’s first two rounds of bond buying, and fell 0.6 percent in periods of no stimulus, the biggest difference of 46 emerging and developed markets tracked by Bloomberg. Chinese manufacturing contracted for the first time in six months in January, a private survey showed today.
Sberbank declined 1.7 percent to $10.75 in London, while Magnit tumbled 3.2 percent to $49.75.
Crude oil, the nation’s chief export earner, added 0.2 percent to $108.04 a barrel in London. Russia receives about half of its budget revenue from oil and natural gas sales.
The dollar-denominated RTS Index (RTSI$) declined as much as 1.6 percent to 1,286.66, the lowest level since Sept. 4, before falling 1.1 percent. Russian equities have the cheapest valuations among 21 developing-nation economies monitored by Bloomberg. Shares on the Micex trade at 3.3 times projected 12-month earnings, compared with a multiple of 9.1 for the MSCI Emerging Markets Index.
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