Russian shares fell to a one-year low after the dollar-denominated gauge tumbled 20 percent from a peak in 2013 and as European Central Bank President Mario Draghi reignited concern over the tapering of global monetary stimulus.
The RTS Index lost 1.1 percent to 1,286.86 at the close in Moscow after yesterday sliding into a bear market. The ruble-based Micex Index retreated 0.7 percent to 1,316.92, the lowest level since June 2012. The volume of shares traded on the Micex, which has declined 11 percent this year, was 5.4 percent below the 30-day average today.
Russia’s “market is struggling to find growth drivers,” Vladimir Bragin, head of research at Alfa Capital in Moscow, where he helps manage $2.9 billion, said by phone. “Liquidity is low, trading volumes have dropped. Investors are looking for an excuse to sell Russia.”
The $2 trillion economy of Russia, which counts on income from oil and gas sales for about half of its budget revenue, is expanding at the weakest pace since a 2009 contraction. Crude oil, Russia’s chief export earner, has decreased 2.2 percent this quarter. ECB policy makers kept their benchmark interest rate unchanged at a record low of 0.5 percent today and Draghi said more stimulus measures were being left “on the shelf.” Europe is Russia’s biggest trade partner.
Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months, limiting the central bank’s scope to cut interest rates, the Federal Statistics Service in Moscow said on June 4.
The ECB today cut its growth forecast for this year, predicting the region’s economy will shrink 0.6 percent from an estimate of minus 0.5 percent made in March. Policy makers raised their 2014 forecast to show growth of 1.1 percent.
“Everybody was waiting for stimulus measures from the ECB,” Ivan Manaenko, head of research at Veles Capital, said by phone from Moscow. “Russia is highly dependent on the situation in Europe.”
The Micex tumbled the most in a year on May 23, the day after Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce the pace of its asset purchases if officials see signs of sustained improvement in growth. The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates.
Russia’s economy will probably expand 2.3 percent in the second quarter, according to the median estimate of nine economists in a Bloomberg survey. That’s less than the 2.5 percent projection a month earlier. The Economy Ministry lowered this year’s growth forecast to 2.4 percent from 3.6 percent in April while the central bank kept its refinancing rate on hold for an eighth month in May.
OAO Mechel, Russia’s steelmaker and biggest coking coal producer, fell for the seventh day, dropping 4.8 percent to 86.10 rubles, the lowest level since January 2009. OAO Severstal retreated 4.8 percent to 234.40 rubles, the biggest decrease on the benchmark today on a percentage basis. The stock declined 4.7 percent to $7.30 in London as most metals decreased.
OAO TNK-BP Holding, the traded unit of the oil venture that OAO Rosneft bought for $55 billion, tumbled as much as 8.2 percent before closing 2.1 percent lower at 40.61 rubles. The company’s board recommended not paying dividends for 2012, according to a statement today.
Rosneft’s Chief Executive Officer Igor Sechin proposed last month that Rosneft only be accountable for TNK-BP dividends from March 21, the date when it took control of the venture.
Crude oil climbed 1.4 percent to $95.05 a barrel in New York, while the Standard & Poor’s GSCI Index of commodities rose 0.4 percent. Brent oil advanced 0.7 percent to $103.76 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s major export blend, increased 0.2 percent to $102.61.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 4.9 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index. Ten-day price swings on the Micex plunged to 17.921 today, the lowest since May 21.
The Russian Volatility Index rose 2.9 percent to 29.01. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. decreased 0.2 percent after tumbling 2 percent yesterday.
The RTS’s 14-day relative strength index climbed to 31, one point above the level that signals to some analysts that a security or gauge is oversold.