Russian stocks are posting the most swings in four months relative to their emerging-market peers as sliding oil and metals prices damp the outlook for the world’s biggest energy exporter.
The Micex Index’s 30-day historical volatility, a measure of fluctuations in Moscow’s equities gauge, climbed to 20.27 yesterday, 6.66 points above that for the MSCI Emerging-Markets Index and the biggest gap since June 22, data compiled by Bloomberg show. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York slid the most since July, while the Market Vectors Russia ETF, the largest Russian exchange-traded fund, sank to a six-week low.
Crude producers OAO Lukoil and OAO Gazprom Neft drove declines among Russian U.S.-listed stocks yesterday, as oil tumbled to a three-month low on concern the slowing global economy will cut demand. The Standard & Poor’s GSCI Spot Index of 24 raw materials erased its 2012 advance. Oil and natural gas contributed about 50 percent of Russian government revenue last year and resource companies make up eight of the 10 biggest equities on the Micex.
“The Micex is a very volatile benchmark as it’s commodity driven,” Arjun Jayaraman, who manages $400 million in emerging-market equities at Causeway Capital Management LLC in Los Angeles, said in a phone interview yesterday. “Investors are getting fearful. We have seen a downturn in oil and commodity prices in the last two days and typically when things turn down, volatility goes up.”
Higher volatility means an asset or index can swing dramatically in a short period, increasing the potential for unexpected losses.
Most BRIC Swings
The Micex tumbled 1.3 percent to 1,455.31 in Moscow yesterday, the biggest one-day drop since Sept. 26.
The gauge, which added 0.2 percent to 1457.71 by 3:52 p.m. in the Russian capital, has the highest volatility reading of the biggest emerging markets known as the BRICs, and was the most volatile versus Brazil’s Bovespa Index yesterday since June. The Bovespa lost 1.7 percent to 57,690.24 yesterday, the weakest close since Sept. 5.
Crude for December delivery sank 2.3 percent to $86.67 a barrel on the New York Mercantile Exchange yesterday, the lowest settlement price since July 12, as companies from U.S. chemical maker DuPont Co. to South Korea’s Posco, the third-biggest Asian steelmaker by output, reported earnings that missed analysts’ estimates. Oil in New York has retreated 21 percent from a 2012 high of $109.77 reached on Feb. 24, as the European debt crisis stokes concern over the slowdown in the global economy.
Crude traded 0.3 percent lower at $86.44 a barrel by 7:43 a.m. in New York.
American depositary receipts of Lukoil, Russia’s biggest independent oil producer, slid 3 percent to $61.95 in New York yesterday, the steepest decline since June 21. The ADRs, equal to one ordinary share, traded at their biggest premium to the Moscow stock since Oct. 15.
Lukoil’s stock on the Micex, where it has the second-biggest weighting behind gas company OAO Gazprom, fell for a second day today, extending yesterday’s 2.3 percent slide to slump 0.5 percent to 1,929.60 rubles, the equivalent of $61.49.
Brent oil for December settlement rebounded today, after declining 1.1 percent yesterday on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend and biggest export earner, also gained, rising for the first time in seven days to add 1 percent to $108.06 a barrel. It fell to the lowest level since Oct. 3 yesterday.
ADRs of Gazprom Neft, the oil arm of the world’s biggest natural gas producer, declined 3 percent in New York yesterday to $24.52, a three-week low, after its shares lost 1.3 percent on the Micex. The Moscow stock advanced 0.9 percent to 155.70 rubles today, or $4.96. Each ADR is equal to five Moscow-traded shares.
The Standard & Poor’s 500 Index retreated 1.4 percent yesterday to 1,413.11. The S&P GSCI Spot commodities index fell 1.4 percent, as copper, gold, nickel and palladium declined. Russia is the world’s biggest producer of nickel and palladium. The spot index was 0.2 percent higher today.
While Russian U.S.-traded stocks and ADRs slipped, futures expiring in December on the dollar-denominated RTS Index rose 0.5 percent to 145,730 in New York. The RTS Volatility Index, which measures expected swings in the index futures, also fell, dropping 2.1 percent to 26.84.
Traders may be anticipating a “snap-back or rally” in Russian stocks after the declines, Causeway’s Jayaraman said.
United Co. Rusal, the world’s largest aluminum producer, rose 3 percent to HK$4.53 in Hong Kong trading, or 58 U.S. cents. The MSCI Asia Pacific Index fell 0.4 percent today, slipping for the fourth trading day.
Futures due in December on the ruble rose for the first time in five days, strengthening 0.3 percent to 31.68 per dollar yesterday in New York. Russia’s currency rebounded from yesterday’s 1.2 percent slump in Moscow, adding 0.2 percent to 31.39 per dollar.