Russian shares, the cheapest emerging-market equities, slid to a one-week low as crude oil dropped and volatility declined.
The Micex Index retreated 0.2 percent to 1,427.94 by the close in Moscow, the lowest since March 27. Trading volumes were 8.1 percent above the 10-day average, while 10-day price swings slumped to 11.14, the lowest since March 15. The dollar-denominated RTS Index decreased 1 percent to 1,425.99. OAO Rostelecom’s preferred shares tumbled 1.6 percent to an almost four-month low as Barclays Plc cut the stock to equalweight on concern over a merger with Tele2 AB’s Russian unit. VTB Group, Russia’s second-biggest lender, fell 1.7 percent.
Crude oil lost 0.4 percent to $96.76 a barrel, falling for the second day in New York. Russia receives about half of its budget revenue from oil and gas. OAO Lukoil, an oil producer, traded down 0.8 percent. Standard & Poor’s GSCI Index slipped 1.1 percent to 644.75, the fourth day of losses. The Micex’s relative strength index was at 36, while a level below 30 signals shares have been oversold.
“The market is oversold, there are chances for a turnaround,” Dmitry Malykhin, who oversees $30 million in Russian assets as chief investment adviser at Moscow-based hedge fund Da Vinci CIS Opportunities, said today by phone. “Russia remains under pressure from falling commodity prices. The budget spending promises are growing while the government continues to rely on oil and other commodities as the main source of revenue.”
Central Bank Chairman Sergey Ignatiev said in Moscow today Russia’s fourth-quarter economic growth was an “extremely” negative surprise. Growth slowed to 2.1 percent, data showed yesterday.
OAO Surgutneftegas, an oil producer, added 4.3 percent to 29.524 rubles, the most since Jan. 28. JPMorgan Chase & Co. raised the stock to overweight from neutral and increased the price estimate to 37 rubles a share, saying the stocks’ drop is a buying opportunity, according to an e-mailed note today. The note also cited expectation the producer will post earnings to international accounting standards, or IFRS, this month, which would improve earnings visibility.
OAO Rosneft declined 0.5 percent to 235.37 rubles, the lowest level since Oct. 31. Russia’s biggest oil producer fell as Bank of America Merrill Lynch removed the stock from its list of preferred emerging-market equities, citing concern about the treatment of minority shareholders at OAO TNK-BP Holding.
OAO Gazprom lost 0.5 percent to 130.30 rubles, extending declines for the third day. Russia’s natural gas export monopoly is valued at less than $100 billion for the first time since 2009. Rising expenditure, declining profit and the prospect of lower-than-forecast dividends have wiped out about a third of state-run Gazprom’s market value over the past year.
Out of 50 stocks on the Micex, 23 rose and 27 fell. The Russian Depositary Index lost 0.9 percent, led by depositary receipts of OAO Severstal, which slumped more than 5 percent.
“Investors don’t see any signals for a turnaround in the state companies’ approach toward investors,” Malykhin said. “A company should function in investors’ interests, but in Russia you’re seeing the opposite. Everyone is tired of this attitude.”
Gazprom trades at 2.9 times estimated earnings, the second-cheapest stock on Russia’s 50-member Micex Index and about one-fifth of Ecopetrol SA, the Colombian oil company which trades at 14 times estimated earnings.
The RTS Volatility Index, which measures expected swings in stock futures, increased 2.3 percent today. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, lost 1 percent to $27.08 today. The Bloomberg Russia-US Equity Index declined 0.8 percent today.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.2 times estimated earnings and has lost 3.2 percent this year, compared with 10.4 times for the MSCI Emerging Markets Index, which has slid 2.9 percent this year.