Internet Censorship Law Triggers Yandex Tumble

Yandex NV, Russia’s biggest Internet search engine, fell for a third day, leading a slump in the nation’s New York-traded shares, on concern lawmakers are preparing to ban access to some websites. RTS futures dropped.

Yandex retreated 2.7 percent to $18.35 yesterday in New York, completing the longest stretch of declines in a month. The Bloomberg Russia-US Equity Index of the most-traded Russian companies listed in the U.S. lost 0.4 percent to 88.12. The RTS stock-index futures expiring in September dropped 1.3 percent to 133,605.

The Duma, Russia’s lower house of the parliament, is scheduled to vote as soon as today on amending a law that bans access to websites that promote criminal activity against children such as pornography and illegal drugs. The Russian version of Wikipedia said yesterday that it temporarily shut its service in protest.

“Investors took it as a sign that Russia seeks to control Internet and may block even those websites that have nothing to do with any criminal activity,” Alexander Vengranovich, an analyst at Otkritie Financial Corp said by phone from Moscow yesterday. “People are concerned it may turn out to be a Chinese-style control over Internet by the government.”

The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, lost 1.1 percent to $25.79, the lowest since June 28. The RTS Volatility Index, which measures expected swings in the index futures, rose 0.7 percent to 31.24.

Delay Law Discussion

Yandex said the Parliament should delay its planned discussion on banning certain websites.

“It is necessary to postpone consideration of the bill and discuss it with the Internet industry representatives,” Ochir Mandzhikov, Yandex’s press officer said in an e-mail from Moscow yesterday. “The need to combat illegal content is evident for civil society, as evident is the need for freedom of speech and access to information.”

The Duma said it plans to vote on the law in a second preliminary reading as soon as today. If approved in a third and final reading and signed in effect by President Putin, the law would give Russian authorities the right to blacklist Internet sites without a court order. Group Ltd., the largest Russian-language Internet company, fell 0.3 percent to $34 in London yesterday, the lowest since July 3.

‘Spread of Pornography’

“Designed to counter the spread of pornography, drug abuse, extremist propaganda, in its current form the amendments leave the door open for a potentially arbitrarily wide expansion of its scope,” Alexey Zabotkin, an analyst at VTB Capital in Moscow, wrote in an e-mailed report yesterday. ‘Tangible legislative action to censor Internet would be perceived quite negatively not only for Russia’s Internet stocks Yandex and Mail.Ru, but also for the broader investment case.’’

Oil, Russia’s major export earner, declined in New York and London after Norway ended a strike that threatened to halt output by western Europe’s largest crude exporter.

Crude oil for August delivery lost 2.4 percent to $83.91 a barrel on the New York Mercantile Exchange yesterday. Prices have decreased 15 percent this year.

Brent oil for August settlement fell 2.5 percent to $97.84 a barrel on the London-based ICE Futures Europe exchange. Urals crude fell 1.4 percent to $97.89 per barrel, the lowest since July 2.

Dividend Payments

OAO RusHydro, Russia’s largest hydropower producer, gained 2.8 percent to $2.53 in New York trading yesterday, the highest level in a week. The stock rose 4 percent to 86.01 kopeks, or 2.6 U.S. cents in Moscow. One ADR is equal to 100 common shares.

President Vladimir Putin said yesterday the company is undervalued and the state won’t sell its stake at the current price. Russia is committed to selling state assets and energy companies should consider increasing dividend payments to boost their market value, he said at a meeting with executives and government officials.

“Even though Russia attracted interest today on the back of Putin’s comments, until there is real solid reform progress any such periods of optimism will be brief,” Chris Weafer, chief strategist at Troika Dialog in Moscow, said by e-mail from Moscow. “Only when investors see real progress in the reform agenda will we able to talk about Russia pulling away from external influences. We are a long way from that position now.”

(Corrects company name to Yandex NV in first paragraph.)
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