Russian stocks dropped the most this month as steelmakers slid on concern China will hold off easing monetary policy, damping investors’ appetite for commodities, and as oil retreated.
The Micex Index fell 1.1 percent to 1,428.75 by the close in Moscow, the biggest one-day drop since July 31. OAO Mechel, Russia’s biggest producer of coal for steelmakers, led the declines, tumbling 4.2 percent. Steel makers OAO Novolipetsk Steel and OAO Magnitogorsk Iron & Steel slid more than 2.1 percent. OAO RusHydro, Russia’s largest hydropower company, tumbled 3 percent.
Crude oil, Russia’s chief export earner, slumped 0.6 percent to $95.47 in New York. Oil and gas contribute about 50 percent of Russia’s state revenue. Chinese new-home prices climbed in 49 of 70 cities tracked by the government, the most since May of last year, the National Bureau of Statistics said Aug. 18. The state bank has no intention of cutting lenders’ reserve requirements in the short term, as suggested by a cash injection last week, according to a weekend commentary in the central bank newspaper Financial News.
“The situation in China is causing investor concern, it’s unclear whether there will be more monetary easing,” Dmitry Postolenko, who manages $110 million in Russian assets at Kapital Asset Management LCC in Moscow, said by phone. “Russia depends on commodity prices and China is a very important player in that market.”
The dollar-denominated RTS Index declined 0.9 percent to 1,403.55, falling for a second day and closing at the lowest level since Aug. 3.
Mechel dropped 4.2 percent to 204.40 rubles. President Vladimir Putin said at a meeting with coal companies that government agencies have to do “a lot” to cut corruption during licensing of fields such as Mechel’s Elga coal deposit.
Standard & Poor’s GSCI Commodity Index was little changed at 667.01, after falling as much as 0.6 percent earlier.
Federal Grid Co. dropped 1.7 percent to 21.75 kopeks. Russia’s high-voltage power transmission monopoly agrees with proposed tariff increases and may issue new shares or receive financing from Russia’s budget to finance upgrades, Chief Executive Officer Oleg Budargin said today.
Russian retail sales grew in July at the weakest pace in 18 months after faster inflation curbed consumer purchasing power, data showed today.
Russia’s central bank will increase benchmark interest rates as inflation nears the upper limit of its target range, according to Citigroup Inc.
“As inflation is crawling up to the upper bound of the Russian central bank’s target range of 5-6 percent, the regulator may hike rates,” analysts led by David Lubin said in an e-mailed report today. Bank Rossii will increase deposit and repo auction rates at its “next meetings,” the analysts said.
Unemployment remained at 5.4 percent for a third month, the lowest level since at least 1999. Economists had forecast an increase to 5.5 percent, according to the median of 11 estimates in a Bloomberg survey.
“The key macro statistics for July came in weak, but regardless revealed continuing real salary growth, retail loan growth and low unemployment, suggesting that consumption growth will resume in the coming month,” Natalia Orlova, chief economist at Alfa Bank, said in an e-mailed report.
OAO Magnit, Russia’s biggest food retailer by market value, added 0.8 percent.
A Moscow court on Aug. 17 found performers for the Pussy Riot punk band guilty of hooliganism and inciting religious hatred and sentenced three members to two years in prison for performing a “punk prayer” in the country’s main Christian Orthodox cathedral urging Putin’s removal.
“Investors are not happy with the Pussy Riot trial but they are not surprised with the outcome,” Peter Westin, chief strategist at Aton Capital in Moscow, said by phone.
Governments from the U.S. to Europe have condemned the trial, while pop stars such as Madonna, Sting and Paul McCartney, whom Putin invited to the Kremlin in 2003 before a Red Square concert, have backed the band members.
The Micex trades at 5.3 times estimated earnings and has rallied 1.9 percent this year. That compares with a multiple of 10 times and a 5.8 percent advance for the MSCI Emerging Markets Index.
Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.