Russian stocks are defying oil’s advance, heading for a second monthly slide as concern over pension fund investment in the market overshadows gains in the nation’s biggest source of export revenue.
The benchmark Micex Index has slumped 2.6 percent in November and the Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. lost 2.1 percent, with both gauges extending declines in October. Futures on Moscow’s dollar-denominated RTS Index were little changed yesterday at 141,980, while contracts expiring in December on the ruble were also steady at 30.936 per dollar.
Russian equities have been falling even as oil, which along with natural gas contributed about 50 percent of budget revenue last year, gained 2.1 percent in the month. The Russia-US index’s 80-day correlation coefficient with New York crude was at 50.3 on Nov.28, the least since March 30, data compiled by Bloomberg show. President Vladimir Putin backed an overhaul of Russia’s pension system this month that his own Finance Ministry says will deplete a source of investment capital.
“Although the potential is huge, the market underperforms as investors want to see more reforms,” Timur Nasardinov, managing director and head of the equity division at Sberbank CIB, a unit of Russia’s biggest lender, said by phone yesterday. “The market is waiting for more proactive reforms, including infrastructure and pension reforms.”
The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, rose 0.4 percent to $27.52 in New York. The Bloomberg Russia-US Index gained 0.8 percent to 91.74 yesterday, rising for the first time in four days. The RTS Volatility Index, which measures expected swings in futures, slipped 1 percent to 23.38 points.
Putin backed a planned pension overhaul on Nov. 14 that was opposed by the Finance Ministry, Economy Ministry and asset managers, who warn it would curb economic growth.
Russian asset-management companies appealed to Putin in a letter on Nov. 2 to block the legislation after Prime Minister Dmitry Medvedev’s Cabinet proposed diverting taxes from future retirement plans to meet current pension payments.
The amount of long-term investment from pension funds, insurers and mutual funds in Russia is equivalent to 8 percent of gross domestic product, below the global average of 120 percent of economic output, Siluanov said on Nov. 28 in Moscow.
Oil rose for the first time in four days in New York yesterday as the U.S. economy expanded more than previously estimated last quarter and on optimism that President Barack Obama will reach an agreement with Congress over a new budget.
‘Periods of Weakness’
Crude for January delivery climbed 1.8 percent to $88.07 a barrel on the New York Mercantile Exchange yesterday. Brent for January settlement rose 1.1 percent to $110.76 a barrel on the London-based ICE Futures Europe exchange yesterday. Urals crude, Russia’s main export oil blend, increased 0.8 percent to $109.18.
The benchmark Micex Index traded for 5.28 times estimated company earnings on Nov. 28, the lowest since August. That compares with a multiple of 15.7 for the main index in India, 16.6 for Brazil and China’s 9.3.
American depositary receipts of OAO Surgutneftegas, the nation’s fourth-biggest crude producer, jumped 2.9 percent to $6.38, the highest level since Oct. 24. The company’s preferred shares advanced 2.6 percent to 20.08 rubles, or 65 U.S. cents, in Moscow yesterday. One ADR equals 10 preferred shares.
OAO Sberbank, Russia’s biggest lender, headed for a 2.3 percent drop in November, the first monthly slump since May. The ADRs were unchanged at $11.38 in New York yesterday. The stock rose 0.1 percent to 87.88 rubles in Moscow, or $2.84, poised for a 4.3 percent retreat in November. One ADR is equal to four shares.