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Russia’s Micex Index Pares Yearly Gain Before U.S. Budget Talks

Russian equities fell, paring their yearly advance, as U.S. lawmakers meet for talks to avoid spending cuts and tax increases that may hobble growth.

The Micex Index slid 0.2 percent to 1,474.72 by the close in Moscow for a 0.2 percent drop in the week. Of the 50 stocks in the gauge, 23 climbed, one was unchanged and 26 dropped. The measure has added 5.2 percent this year. OAO Mostotrest, the bridge and road builder part-owned by President Vladimir Putin’s judo partner Arkady Rotenberg, tumbled 7.8 percent. Steelmaker OAO Severstal sank 2.2 percent.

Congressional leaders plan to meet with Obama today and House Republicans will convene Dec. 30 as U.S. lawmakers seek to sidestep more than $600 billion in spending cuts and tax gains that will start in January. Industrial shares led declines on the Micex, dropping 3.4 percent on average.

“Investors are concerned that if the U.S. doesn’t reach a budget deal, we’ll see another round of economic crisis,” Slava Smolyaninov, head of research at UralSib Capital, said by phone from Moscow. “A potential downgrade of the U.S. government debt is a high risk.”

Failure to reach a budget agreement would push the U.S. into recession for the first half of 2013, the nonpartisan Congressional Budget Office has said. The amount of shares traded on the Micex was 33 percent below the 100-day average, data compiled by Bloomberg show.

Multisistema IPO

Russian markets close from today for New Year and Christmas holidays, with trading restarting Jan. 8.

OAO Multisistema, a water utility service company, yesterday raised 98 million rubles ($3.2 million) in an initial public offering on the Moscow Exchange, according to a statement from the bourse today. The company sold 10 million shares at 9.8 rubles apiece, after planning to list up to 35 million shares.

Multisistema, which sold shares in the fourth IPO by a Russian company this year, cited “unfavorable” market conditions.

The RTS Index, Russia’s dollar-denominated equity gauge, decreased 0.5 percent to 1,526.98. The Bloomberg Russia-US stocks measure fell 0.2 percent to 97.77 today. The gauge has added 8 percent this year.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, slid 0.5 percent to $29.13. The RTS Volatility Index, which measures expected swings in the stock futures, increased 0.9 percent to 24.22 points.

Year’s Worst

Standard & Poor’s GSCI Index was poised for a 0.2 percent gain in the year. The Russian Depositary Index rose 0.3 percent to 1,727.42. Most metals fell on the London Metal Exchange, including tin, nickel and aluminum.

Crude oil, Russia’s main export, climbed 0.2 percent to $91.04 a barrel in New York. The country receives about half of its budget revenue from the oil and natural gas industry.

OAO OGK-2, the wholesale power generator controlled by OAO Gazprom, added 0.1 percent to 34.27 kopeks, paring its loss in the year to 55 percent. The stock is the Micex’s worst performer this year.

OAO Sollers, a Russian automaker that works with Ford Motor Co., increased 1.9 percent to 684.60 rubles, extending its 125 percent rally this year. The shares are the best performer on the Micex this year.

The gauge trades at about 5.4 times estimated earnings. That compares with a multiple of 10.6 times for the MSCI Emerging Markets Index, which has gained 15 percent this year.

Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.

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