Russian stocks dropped for a third day as power companies OAO MRSK Holding and Federal Grid Co. retreated on concern the government will delay a decision on merging the companies.
The Micex Index fell 1.1 percent to 1,456.74 by the close in Moscow, the biggest drop since Sept. 26. MRSK Holding retreated 3.4 percent and Federal Grid lost 2.3 percent. OAO Raspadskaya slumped 2.8 percent after rallying as much as 12 percent as Evraz Plc, the Russian steelmaker part-owned by billionaire Roman Abramovich, said it’s buying a controlling stake in the coal producer.
Federal Grid and MRSK slumped after Dvorkovich told an investment forum in Moscow yesterday the government would determine the details of the power companies’ merger by the middle of 2013. The European Central Bank and the Bank of England kept their interest rates on hold. Applications from jobless benefits in the U.S. increased 4,000 to 367,000 in the week ended Sept. 29, Labor Department figures showed today.
“There’s too much uncertainty out there right now for Russia to outperform,” Julian Rimmer, a trader at CF Global in Moscow, said by e-mail.
The ECB is ready to start buying government bonds as soon as the necessary conditions are fulfilled, President Mario Draghi said today.
The Micex rose as much as 0.4 percent earlier as a private report yesterday showed better-than-expected employment gains in the U.S., while service industries expanded more than forecast in September. Oil, Russia’s main export earner, rose 1.3 percent to $89.32 a barrel in New York.
Russian stocks fell yesterday after Spanish Prime Minister Mariano Rajoy said he has no plans to request rescue funds in the near term.
Raspadskaya dropped 2.8 percent to 79.03 rubles after surging 12 percent earlier. Evraz will raise its stake in Raspadskaya to 82 percent by buying out management and will complete the acquisition by the end of the year, according to a company statement. Evraz fell 0.3 percent to 246.50 pence in London.
Bank Rossii doesn’t rule out raising interest rates or keeping them unchanged tomorrow, First Deputy Chairman Alexei Ulyukayev said at a Moscow investment forum on Oct. 2. “Inflationary risks are higher” than the threat of an economic slowdown, he said.
The Russian central bank raised the refinancing rate for the first time in 16 months last month. Consumer prices rose 6.6 percent from a year earlier after a 5.9 percent increase in August, the Federal Statistics Service in Moscow said in an e-mailed statement today. Inflation quickened to the fastest in 10 months in September, exceeding the bank’s target and economist forecasts as droughts pushed up food prices and utility tariffs were raised after a delay.
“We view the news as negative for both MRSK Holding and Federal Grid,” Alexander Kornilov, an analyst at Alfa Bank in Moscow, said in an e-mailed report. “One of the major catalysts is now being postponed, while the persisting uncertainty over the scheme of the merger will continue to weigh on both stocks, undermining investors’ interests.”
AFK Sistema rose 1.3 percent to 24.86 rubles, the biggest gainer.
The Micex trades at 5.5 times estimated earnings. The benchmark index has rallied 3.9 percent this year. That compares with a multiple of 10 times and a 9.6 percent advance for the MSCI Emerging Markets Index.
Russian equities have the lowest valuations based on projected earnings among 21 emerging markets tracked by Bloomberg.