Russian equities fell, extending a 12 percent drop from this year’s high, on concern growth in the world’s biggest energy exporter will slow.
The Micex Index slid 0.2 percent to 1,378.29 by the close in Moscow after a 1.5 percent retreat last week. Industrial and consumer goods shares led the declines among nine industry groups, trading down at least 1.5 percent.
Russian consumer spending grew less than economists estimated last month, adding to evidence that the economy is losing steam, according to data released on May 24. The central bank kept its main interest rates unchanged for an eighth month in May amid accelerating inflation. The volume of shares traded on the Micex was 66 percent below its 30-day average, while 10-day price swings subsided from a September high to 28.762. Markets in the U.K. and U.S. are closed today for public holidays. Crude slipped 0.6 percent to $93.59 a barrel in electronic trading in New York.
“Investors realize it’s time to cut rates,” Victor Bark, who oversees about $2.8 billion as the head of asset management at Alfa Capital in Moscow, said by phone. “Today we’re seeing low activity because of the holidays in the U.S. and U.K.”
The Micex tumbled the most in a year on May 23, after manufacturing in China unexpectedly contracted and as concern the U.S. Federal Reserve will crimp stimulus measures curbed appetite for riskier assets.
Outgoing Bank Rossii Chairman Sergey Ignatiev has limited room for policy easing with inflation more than a percentage point above target, putting him at odds with an international push for monetary stimulus this month. Bank Rossii is scheduled to meet on interest rates in the first half of June, just before Ignatiev steps down to be replaced by Elvira Nabiullina, a former economy minister and now aide to President Vladimir Putin, on June 24.
“Rates will definitely be cut with Nabiullina’s arrival,” Bark said.
Russia-dedicated funds posted a third consecutive week of inflows in the period ended May 22, the longest stretch since the third quarter of 2012, Cameron Brandt, research director at EPFR Global, said on May 24.
OAO Lukoil, Russia’s largest oil producer that isn’t state-owned, fell 0.9 percent to 1,994.30 rubles, the lowest since May 2. OAO Mobile TeleSystems, Russia’s largest mobile-phone company, dropped 1.4 percent to 261.65 rubles.
MSCI Inc. will annouce it’s cutting the combined weighting of MTS’s American depositary receipts and AFK Sistema’s global depositary receipts to 4.5 percent from 9 percent in the Russia 10/40 Index after the market close today, according to an e-mailed note from VTB Capital today. The rebalancing will take effect June 3.
Sistema retreated 0.8 percent to 26.90 rubles. OAO Magnit’s GDRs will receive a 9 percent weighting, replacing the two stocks in the gauge’s top four, according to the note. Magnit’s shares added 0.6 percent to 7,129 rubles.
Russia’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.1 times its 12-month estimated earnings and has lost 6.5 percent this year, compared with a 10.5 multiple for the MSCI Emerging Markets Index, which has dropped 2.5 percent in the period.
The dollar-denominated RTS Index dropped 0.3 percent to 1,385.08. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. retreated 0.7 percent to 92.01 on May 24.