Most stocks in the Micex Index (INDEXCF) declined as the downing of two fighter-jets by rebels in Ukraine stoked concern Russia will face tougher sanctions. OAO Gazprom dropped on speculation the company may sell new shares.
The 50-member Micex fell as much as 0.7 percent before closing little changed at 1,406.58 in Moscow. Twenty-eight stocks retreated and 22 rose. Gazprom fell 1.1 percent as Kremlin economic aide Andrei Belousov said the nation’s gas export monopoly needs to be recapitalized. The ruble strengthened 0.6 percent versus the dollar to 34.7755 by 6 p.m. as exporters prepared to make large tax payments.
Rebels downed two SU-25 fighters in the Donetsk region in eastern Ukraine, a spokesman for the country’s Defense Ministry said. The European Union yesterday said it will announce new sanctions tomorrow. The bloc may restrict Russia’s access to capital markets and to sensitive energy and defense technologies unless President Vladimir Putin expedites an investigation into the downing of Malaysian Air MH17.
The downing of the fighter-jets “has increased expectations of more serious sanctions,” Sabina Mukhamedzhanova, a fund manager at Promsvyaz Asset Management in Moscow, which manages about 17.9 billion rubles ($514 million), said by e-mail. “Everyone is awaiting the EU’s sanctions, which should be announced tomorrow.”
Bonds, stocks and the ruble slumped on July 17 after the U.S. leveled fresh sanctions against Russian companies. About $47 billion was erased from the Micex’s market value last week, the most in four months, according to data compiled by Bloomberg. OAO Rosneft, OAO Novatek, OAO Gazprombank and Vnesheconombank were blocked from accessing U.S. equity or debt markets for new financing with maturities longer than 90 days.
New sanctions would threaten an economy forecast to grow 0.5 percent this year, the slowest pace since a contraction in 2009, according to a Bloomberg survey.
Providing gas to partners in Asia is a “strategic” matter, Belousov told reporters today. A stock sale is one of several options to fund infrastructure needed for Gazprom’s recently signed 30-year supply contract with China, Russian President Vladimir Putin told reporters on June 6.
“The signal that Gazprom needs extra capital is negative because existing shareholders’ stakes may be diluted,” Alexei Kokin, an oil and gas analyst at UralSib Financial Corp in Moscow, said by phone.
OAO Magnit, Russia’s largest retailer, rose 5.3 percent to 9.880 rubles, the most since March 17, after posting a 49 percent jump in net income last quarter. The company today boosted sales and profitability forecasts for the year.
OAO GMK Norilsk Nickel advanced 1.9 percent to 7,145 rubles. The company was raised to investment grade at Fitch Ratings yesterday, citing corporate governance improvements. Prime Minister Dmitry Medvedev signed a decree to cancel nickel and copper export duties, Interfax reported yesterday.
OAO Bashneft tumbled 6.4 percent to 2,035 rubles, the biggest decliner on the Micex. AFK Sistema, which owns Bashneft, said its Sistema-Invest unit has received a notice about restrictions on transactions in its Bashneft shares, according to an e-mailed statement today. OAO Reestr, Russia’s official registry, on July 15 imposed restrictions on Sistema’s transactions in the Bashneft stock it owns.
“We regard the news as negative for Sistema and Bashneft,” Alexander Vengranovich, an analyst at Otkritie Capital, said in an e-mailed note. “Now the full stake of Sistema in Bashneft is blocked for any transactions, so no placements of Bashneft shares controlled by Sistema Group entities are possible.”
OAO Mechel, the nation’s biggest coking-coal producer, rose 3.5 percent to 41.3 rubles. Russia will avoid Mechel’s bankruptcy, Belousov said today in Moscow.
The Micex trades at 5.1 times estimated earnings, making it the cheapest measure among 21 emerging markets tracked by Bloomberg. That compares with a multiple of 5.3 at the end of February, before Russia’s incursion in Crimea. The dollar-denominated RTS Index (RTSI$) advanced 0.4 percent to 1,272.02.
The yield on government ruble bonds due 2027 fell two basis points to 9.08 percent. The ruble’s gain was boosted by exporters facing about 373 billion rubles in tax payments this week, according to Sberbank CIB. The ruble rose 0.7 percent to 40.2068 against the central bank’s target basket of dollars and euros as of 6 p.m. in Moscow, when the regulator ends its daily market operations. It gained 0.7 percent against the euro to 46.8450.
To contact the editors responsible for this story: Wojciech Moskwa at email@example.com Alex Nicholson, Chris Kirkham