Russian shares declined for a third week as OAO Mobile TeleSystems slumped on concern the country’s largest mobile provider will lose market share.
The Micex Index dropped 0.7 percent to 1,416.69 by the close in Moscow, the lowest level since Dec. 4 and a 1.5 percent retreat in the week. Trading volumes were 61 percent above the 30-day average, while 10-day price swings fell to 8.9303, the lowest since Feb. 12. The dollar-denominated RTS Index retreated 0.6 percent to 1,411.09.
Mobile TeleSystems, also known as MTS, tumbled 3.4 percent to 261.10 rubles in Moscow, the biggest drop since May 30, while mobile operator VimpelCom Ltd. gained 1 percent to $11.66 as of 12:30 p.m. in New York. VTB Group, Russia’s second-biggest lender, said yesterday it had completed a $3.55 billion acquisition of Swedish Tele2’s wireless business in Russia, fuelling speculation the unit will be sold to state-run OAO Rostelecom. VTB declined 1 percent to 4.69 kopeks in Moscow and slipped 0.3 percent to $2.926 in London.
“There’s a risk of an appearance of a new player in an already overly-saturated market,” Ksenia Arutyunova, an analyst at Rye, MAN & Gor Securities, said by phone from Moscow. “If Tele2 merges with Rostelecom, it’ll create a major competitor for MTS, MegaFon and VimpelCom.”
The bank may resell the company to Moscow-based Rostelecom in six to eight months once a merger with Svyazinvest is completed, Renaissance Capital has said.
VTB is in talks with Arkady Rotenberg, an investor in Rostelecom, to set up a joint venture with Tele2 Russia, the Vedomosti newspaper reported today, citing people it didn’t identify. A joint venture would create Russia’s fourth-largest mobile operator and Rostelecom has both 3G and 4G licenses, Vedomosti said.
“A new mobile giant may appear,” Alfa Bank analysts said in an e-mailed note today.
OAO MegaFon, Russia’s second-largest mobile-phone operator, tumbled the most on record in London trading. The shares sank 9.1 percent to $26.96 as trading volume exceeded the daily average for the past three months by 65 percent, data compiled by Bloomberg show. JPMorgan Chase & Co. cut the stock to neutral on “pricey” valuations.
Russian equities extended declines after U.S. employers hired fewer workers than forecast in March, Labor Department data showed today.
Crude oil slid 0.9 percent to $92.45 in New York, heading for its biggest weekly drop in six months. Russia receives about half its budget revenue from oil and natural gas. Out of 50 stocks on the Micex, 23 rose, 25 fell and two were unchanged.
OAO Rosneft, Russia’s largest oil producer, dropped 2.7 percent to 230.79 rubles. The stock retreated 2.9 percent to $7.225 in London. OAO Gazprom, the natural-gas export monopoly, lost 0.5 percent to 130.49 rubles.
HSBC Holdings Plc cut Russian equities to neutral in a report dated April 4, citing its exposure to the European crisis, a high inflation rate and slowing output. Russia’s inflation rate in March fell to 7 percent from 7.3 percent in February, which was the highest in 18 months, according to Federal Statistics Service data. Russia’s fourth-quarter economic growth slowed to 2.1 percent, data showed on April 2.
Russian equity funds posted outflows of $73 million in the week ended April 3, according to an e-mailed note from VTB Capital, which cited EPFR Global data.
The Russian Depositary Index declined 0.6 percent, with AFK Sistema’s depositary receipts slumping 4.4 percent. OAO Magnit’s depositary receipts surged 2 percent to 6,090.20 rubles as Russia’s largest food retailer by market value plans to open almost 10,000 stores in the next five years the Krasnodar, it said in e-mailed response to questions today.
The RTS Volatility Index, which measures expected swings in stock futures, dropped 4.2 percent today. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, fell 0.9 percent to $26.81 today. The Bloomberg Russia-US Equity Index tumbled 0.6 percent to 94.17 in New York.
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 3.9 percent this year, compared with 10.5 times for the MSCI Emerging Markets Index, which has slid 4.6 percent this year.