Russian shares dropped to the lowest level in more than a year on concern commodities will extend declines, curbing growth in the world’s biggest energy exporter.
The Micex Index fell 2.5 percent to 1,301.31 by the close in Moscow, the lowest level since June 5, 2012. Financial and utilities shares led the retreat among nine industry groups. The volume of shares traded on the gauge was 17 percent below the 30-day average, while 10-day price swings subsided to 20.041, a second day of declines.
The Standard & Poor’s GSCI gauge of 24 raw materials slumped 1.2 percent as the Bank of Japan disappointed investors by failing to expand monetary stimulus and concern grew that the U.S. Federal Reserve will scale back debt purchases. Russian central bank Chairman Sergey Ignatiev, who presided yesterday over his last policy meeting after leading the regulator for more than a decade, kept key rates on hold for a ninth month.
“The market is falling on fears that we’re entering the end of the commodity cycle, that the rise of commodities is over,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “Russia is very closely correlated to oil.”
The dollar-denominated RTS Index, which last week entered a bear market, declined 2.8 percent to 1,263.66. On the Micex, 4 stocks increased while 46 dropped.
The S&P GSCI Index is down 4.3 percent this year. The RTS will decline to 1,250 over the next twelve months as oil falls 5 percent a year, according to a note from Sberbank CIB analysts today. Rapid, investment-led growth in China is over, signaling the end of the “commodity supercycle” and implying a stronger dollar as well as weak commodity-market performance, according to Sberbank analysts.
Bank Rossii’s refinancing rate was held at 8.25 percent, the regulator said in a statement on its website yesterday. That matched the median estimate in a Bloomberg survey of 26 economists, with four predicting a quarter percentage point cut. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months, according to data last week.
The rates decision means that completing an easing cycle Ignatiev announced in April will fall to his successor, Kremlin economic aide Elvira Nabiullina, who takes over in two weeks.
The Micex tumbled the most in a year on May 23, the day after Federal Reserve Chairman Ben S. Bernanke suggested the central bank could curtail its bond buying if the job market improves in a “real and sustainable way.” The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates.
Russia’s Economy Ministry lowered this year’s growth forecast to 2.4 percent from 3.6 percent in April.
Power stocks fell after President Vladimir Putin ordered the government to make proposals for lower tariff increases by June 19. OAO Russian Grids dropped 4.1 percent to 1.042 rubles, the lowest since March 2009, while Moscow United Electric Grid Co. sank 2.6 percent to 1.2556 rubles.
“Power companies’ revenue will drop while capex remains high,” Sergey Beiden, an analyst at Otkritie Financial Corp. in Moscow, said by phone. “Most likely, this won’t have a very good outcome.”
OAO Tatneft, an oil producer, retreated 4.2 percent to 171.77 rubles. OAO Gazprom, Russia’s biggest natural gas producer, lost 3.8 percent to 111.93 rubles, the lowest since March 2009.
Crude, which together with natural gas contributes about 50 percent of Russia’s budget revenue, traded down 1.2 percent at $94.58 a barrel.
Brent for July settlement fell 1.7 percent to $102.15 a barrel on the London-based ICE Futures Europe exchange, the second day of declines. Urals crude, Russia’s major export blend, declined 0.5 percent to $102.43.
The country’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 4.8 times its 12-month estimated earnings, having lost 12 percent this year, compared with a multiple of 9.8 for the MSCI Emerging Markets Index, which is down 9.3 percent.
The Russian Volatility Index advanced 10 percent to 30.98. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. fell 2 percent to 84.20 today.