Russian shares erased gains as investors sold riskier assets after European Central Bank President Mario Draghi said risks remain to the region’s economy. Volatility plunged to an almost two-month low.
The Micex Index fell less than 0.1 percent to 1,426.87 by the close in Moscow after rising as much as 0.9 percent earlier. Trading volumes were 41 percent above the 30-day average, while 10-day price swings slumped to 9.388, the lowest since Feb. 12. VTB Group, Russia’s second-biggest lender, dropped 2.2 percent. The dollar-denominated RTS Index lost 0.5 percent to 1,419.45, the lowest level since Nov. 28.
Weak economic activity has been evident in the early part of this year, Draghi said at a press conference in Frankfurt after the ECB kept its benchmark interest rate at a record low of 0.75 percent. Europe is Russia’s largest trade partner. Crude oil tumbled 1.8 percent to $92.72 in New York. Russia receives about half its budget revenue from oil and natural gas.
“Investors are fleeing emerging-market stocks because of the crisis in Europe and in Cyprus,” Victor Markov, an analyst at Kapital Asset Management LLC, said by phone from Moscow.
Out of 50 stocks on the Micex, 19 rose and 31 fell. The Russian Depositary Index erased earlier gains, declining 0.4 percent, led by VTB Group’s depositary receipts dropping 2.9 percent.
OAO Mobile TeleSystems retreated 2 percent to 270.32 rubles, while VimpelCom Ltd. lost 1 percent to $11.77 in New York. State-run lender VTB Group said today it had completed a $3.55 billion acquisition of Swedish Tele2’s wireless business in Russia that was first announced last week.
VTB’s London traded stock dropped 2.9 percent. The bank may resell the company to Moscow-based OAO Rostelecom in six to eight months once the merger with Svyazinvest is completed, Renaissance Capital has said.
“This puts downside risk to all big-three players,” Luis Saenz, head of equity sales at BCS Financial Group, said in an e-mail.
OAO Phosagro jumped 2.9 percent to 1,367.80 rubles to a record-high. The management of the world’s largest phosphate fertilizer maker proposed paying as much as 2.5 billion rubles ($79 million) in additional dividends for 2012, according to a person with knowledge of the matter. Phosagro’s press service confirmed that the board will discuss dividends, without elaborating.
OAO TNK-BP Holding rallied as much as 11 percent, closing up 7.3 percent at 43.52 rubles, the biggest gain since the stock’s listing on the exchange in 2010, after a Russian central banker criticized treatment of minority shareholders by its new parent, OAO Rosneft.
TNK-BP Holding, the traded unit of oil company TNK-BP, fell to a record low on March 26 as Rosneft approved a borrowing limit of about $10 billion from TNK-BP’s affiliated businesses.
“Did management act rationally? Yes, it did,” Sergey Shvetsov, a deputy central bank chairman, said at a conference organized by the Moscow Exchange today. “Was it legal? It was. Is this kind of thing good for financial markets? No, it isn’t.”
OAO Alrosa dropped as much as 2 percent before trading down 0.9 percent at 31.22 rubles. Russia plans to sell a stake in the diamond miner in the third or fourth quarter, Olga Dergunova, head of the Federal Property Management Agency, told reporters today in Moscow. The regional government of Yakutia will make a decision “separately” on the stake it holds, she said. Russia would “welcome” a sale of the region’s stake because it would help to create “sufficient” liquidity, Dergunova said.
OAO Aeroflot jumped as much as 3.3 percent, closing up 2.6 percent at 53.95 rubles. Russia’s biggest airline was raised to buy at Deutsche Bank AG today. Aeroflot is ready for a state stake sale this year, Interfax reported, citing Economy Minister Andrei Belousov.
The RTS Volatility Index, which measures expected swings in stock futures, tumbled 1.2 percent today. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, rose 0.8 percent to $26.99 today. The Bloomberg Russia-US Equity Index added 0.4 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 10.3 times for the MSCI Emerging Markets Index, which has slid 3.5 percent this year.