The ruble fell to a three-month low as bonds and equities tumbled amid warnings President Vladimir Putin may send troops into Ukraine. OAO Sberbank slumped on concern the lender may be removed from MSCI Inc.’s Russia gauge.
The ruble lost 0.3 percent to 36.1775 per dollar at 6 p.m. in Moscow, the weakest level since April 15, and the Micex stock index dropped 1.7 percent to 1,334.66, the lowest since May 6. The yield on 10-year bonds rose 19 basis points to 9.86 percent, the highest since October 2009 on a closing basis.
Investors are fleeing Russian assets as the crisis in eastern Ukraine worsens. Russia’s Foreign Ministry has called for a humanitarian mission to avert a “catastrophe” in the region. Poland’s prime minister said today the risk of an invasion has increased as the number of soldiers near the border mounted. NATO said Russia could use the pretext of a peacekeeping mission to send in troops.
The troop buildup “adds to the sense that the crisis with Ukraine is ongoing and could escalate,” William Jackson, an emerging-markets economist at Capital Economics Ltd. in London, said by phone. The market declines also reflect “concerns about potential retaliatory measures from Russia,” he said.
Putin ordered a ban on some food imports from countries that sanctioned Russia and asked the government to make a list of banned produce, according to an e-mailed statement from the Kremlin after the market close.
The ruble slid 4.9 percent against the dollar in the past month as the U.S. announced tougher sanctions on some Russian companies, and the European Union imposed penalties on the nation’s oil and gas, defense and financial industries. That’s the worst performance among 24 emerging-market currencies tracked by Bloomberg.
The currency weakened 0.1 percent to 48.284 against the euro and fell 0.2 percent versus the central bank’s target basket of dollars and euros to 41.6246.
Sberbank slid 3.6 percent to 69 rubles, the weakest since October 2011. The lender’s preferred shares fell 6.4 percent to 52.64 rubles, the lowest since October 2011.
MSCI is discussing deleting Sberbank shares from its MSCI Russia index, in addition to a review of VTB Bank announced earlier and the decision will be announced on Aug. 8, MSCI said in an e-mailed statement. The EU has blocked local investors from buying new stock and bonds issued by Sberbank and VTB along with other companies it’s sanctioned for Putin’s actions in Ukraine.
Sberbank’s ordinary shares are the third-largest constituent of the MSCI Russia after OAO Gazprom and OAO Lukoil, with an 11 percent weighting. Sberbank preferred shares have a 0.8 percent weighting.
Removing Sberbank may trigger $600 million in outflows from passive funds from the index and more than $5 billion from active funds, Iskander Abdullaev, an analyst at Sberbank CIB, the lender’s investment-banking unit, wrote in an e-mailed note.
“People are starting to realize that sanctions will have a long-term negative effect and investors’ attitude toward Russia will worsen,” Vitaly Kupeev, an analyst at Allianz Investments in Moscow, said by phone. “If Sberbank is removed from MSCI, the outflows will be colossal. The consequences of Sberbank’s and VTB’s removal will be terrifying. ”
Sberbank’s market capitalization has slumped about $3.4 billion since July 31 when the EU announced sanctions.
The share of foreign investors in the OFZ bond market rose to 24.7 percent by June 1, the central bank said on its website, the highest since November. Five-year credit default swaps rose 2 basis points to 261, the highest since May 6.
“Foreigners could have been overweight ruble bonds before the latest spike in tensions, so they may be actively reducing them,” Roman Dzugaev, a fixed-income trader at BFA Bank in St. Petersburg, said in e-mailed comments.
The Micex trades at 4.8 times estimated earnings, making it the cheapest among 21 emerging-market measures tracked by Bloomberg. That compares with a multiple of 5.3 at the end of February, before Russia’s incursion into Ukraine’s Crimea peninsula. The dollar-denominated RTS Index (RTSI$) fell 2.6 percent to 1,160.86, the lowest since May 5.
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