Russian shares fell to the lowest level in more than three months as Cyprus’s bailout plan cast doubt on the safety of $60 billion of loans and deposits in the island nation.
The Micex Index retreated for a third day, slipping 0.8 percent to 1,417.00 by the close in Moscow, the lowest level since Dec. 4. Utilities and consumer goods stocks led the decline, down at least 3 percent on average. The dollar-denominated RTS Index slid 0.9 percent to 1,445.46.
Cyprus agreed to shut its second-largest bank and tax deposits of more than 100,000 euros ($129,000) yesterday after lawmakers rejected an earlier plan. The new deal is “clearly worse” for Russia, Bank of America Merrill Lynch said yesterday, reducing its recommendation on the nation’s equities to neutral.
“Russian markets continue to be negatively affected by Cyprus,” Sergey Fundobny, head of research at Arbat Capital in Moscow, said by phone today. “The bailout bears anti-Russian characteristics since the majority of bank deposits consists of Russian money. Under such bailout conditions, foreign investors will be staying away from Russian assets.”
Russian lenders and companies had about $31 billion in Cypriot banks by the end of 2012, according to a March 18 Moody’s Investors Service report, while another $29 billion has been given in loans to Cypriot firms with origins in Russia. The benchmark Micex Index recorded its steepest decline since May last week following a proposal to tax savings accounts to secure a 10-billion euro bailout from the euro area.
Morgan Stanley recommended buying Russian stocks, citing lower valuations relative to emerging-market peers, according to an e-mailed note today.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.3 times estimated earnings after losing 3.9 percent this year. That compares with a multiple of 10.5 times for the MSCI Emerging Markets Index, which has dropped 2.6 percent this year.
OAO MRSK Holding tumbled 4.1 percent to 1.579 rubles, while OAO Inter RAO UES declined 4.6 percent to 1.79 kopeks. OAO Mechel, Russia’s biggest coking coal producer, retreated as much as 4.8 percent before falling 2.5 percent to 154.20 rubles.
OAO Novolipetsk Steel, the Russian steelmaker controlled by billionaire Vladimir Lisin, lost 4.7 percent to 47.58 rubles, the lowest level since April 2009. The number of shares traded was about 9.7 million, equivalent to about twice the stock’s three-month average.
The steelmaker sees first-quarter earnings before interest, tax, depreciation and amortization “sequentially lower” and revenue dropping 5 percent, it said in a regulatory filing today.
Bank St. Petersburg dropped 3.4 percent to 36.66 rubles, the lowest since May 2009. The bank’s 2012 net income fell to 1.3 billion rubles, compared with 5.9 billion rubles a year earlier, the lender said in a statement on its website today.
The Russian Depositary Index retreated 0.6 percent to 1,635.48. OAO Severstal’s depositary receipts led the decline, losing 5.3 percent.
Crude prices rose 0.6 percent to $95.41 per barrel in New York, increasing for a third day. Oil and gas contribute about 50 percent of Russia’s state revenue. Standard & Poor’s GSCI Index of Commodities added 0.2 percent to 650.46.
The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, fell 0.5 percent to $27.32 in New York, heading for its lowest level since Nov. 16. The RTS Volatility Index, which measures expected swings in the stock futures, declined 6.3 percent to 20.56.