The Micex Index (INDEXCF) fell the most among emerging markets and bonds slid as the U.S. and the European Union expanded sanctions against Russia over the annexation of Crimea and ratings companies cut the nation’s outlook.
The benchmark stock index dropped 1 percent to 1,307.34 by the close in Moscow, the most among 19 emerging markets tracked by Bloomberg. The yield on government bonds due February 2027 jumped 12 basis points, the most in a week, to 9.42 percent.
Standard & Poor’s and Fitch Ratings cut Russia’s credit outlook to negative after the U.S. penalized officials and business leaders named as having ties to President Vladimir Putin. U.S. President Barack Obama also signed a new executive order authorizing, though not implementing, sanctions affecting unidentified parts of the economy. EU leaders today added 12 names to their list of Russians and Ukrainians hit with asset freezes and travel bans.
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“The sanctions threaten to further slow the Russian economy’s pace of growth, which is bad for all assets,” Dmitry Dorofeev, a money manager and strategist at BCS Financial Group in Moscow, said in e-mailed comments.
Putin’s move to annex Crimea following the ouster of his ally Viktor Yanukovych from the Ukrainian presidency last month has pushed Russia and the West into their worst crisis since the end of the Cold War. Reacting to the sanctions, Russia banned entry to nine U.S. officials, including House Speaker John Boehner and Senator John McCain.
Senators in the Federation Council ratified the treaty, already signed by Putin, needed for Russia to absorb Crimea and its Black Sea port of Sevastopol. They also passed constitutional changes approved by the State Duma yesterday. The European Union blacklisted 12 Russian and Crimean political and military figures, including a state news agency chief and five officials close to Putin, a document obtained by Bloomberg News showed.
Russian equities have the cheapest valuations among 21 developing countries monitored by Bloomberg, with shares on the Micex trading at 4.8 times projected 12-month earnings, compared with a multiple of 9.1 for the MSCI Emerging Markets Index.
The ruble strengthened 0.2 percent to 42.4800 against the central bank’s dollar-euro basket by 6 p.m., when it stops market operations, following yesterday’s 0.5 percent slide. The currency is trading within the zone where the central bank sells $400 million per day as a part of regular interventions to slow its slide. The regulator raised its target ruble corridor by 5 kopeks to 36.20-43.20 versus the basket on March 20.
Russian troops massing near Ukraine’s eastern border and protests by pro-Russian activists in the east and south of Ukraine -- the second most populous former Soviet state with more than 40 million people -- have raised concerns Putin may order a further push into its neighbor.
The Treasury Department’s sanction list affects businessmen including Gennady Timchenko, who controls OAO Novatek along with Leonid Mikhelson, Yury Kovalchuk, who owns Bank Rossiya and CTC Media, and Putin’s former judo partner Arkady Rotenberg, an investor in road builder OAO Mostotrest. (MSTT)
Novatek, Russia’s largest private gas producer, sank 7.9 percent in Moscow today to 330.73 rubles, the most on the Micex. The stock dropped 5 percent in London yesterday after the sanctions were announced and traded 9.1 percent lower at $96.69 today. CTC Media Inc. (CTCM) fell to the lowest level in more than a year today in New York, while Mostotrest tumbled 1.8 percent to 88.96 rubles.
OAO Sberbank, the nation’s biggest lender, retreated 1.2 percent to 78.47 rubles. VTB Group fell 2.6 percent to 3.399 kopeks.
Raiffeisen Bank International AG’s Russian arm, one of the 12-biggest lenders in the country, is seeing strong inflows of cash from abroad as Russian companies repatriate funds concerned with possible asset freezes, the Austrian bank said yesterday.