The Micex Index fell for the first time in four days on investor concern the Federal Reserve may signal a faster-than-expected tapering of U.S. financial stimulus, while Russia’s central bank chairman warned of “abnormally high” capital outflows.
The country’s benchmark equities gauge lost 0.9 percent to 1,323.57 by the close in Moscow. Russia’s stocks have the cheapest valuations among 21 emerging markets tracked by Bloomberg. OAO Sberbank, Russia’s biggest lender, dropped 1.9 percent to 94.57 rubles. The stock lost 2.9 percent to $11.74 in London.
Fed Chairman Ben S. Bernanke holds a press conference today after a two-day policy meeting. More than $2 trillion has been lost from global markets since May 22, when Bernanke signaled Fed may trim its asset-buying program. While Russian capital outflow sank to $54 billion in 2012 from $81 billion the year before, it remains high, central bank Chairman Sergey Ignatiev said today in Moscow.
“We’re expecting the market to react to Bernanke’s speech at the meeting,” Oleg Popov, who manages $1 billion of securities for Allianz Investments, the asset-management arm of Europe’s biggest insurer, said by phone from Moscow. “If the Fed decides to curb the asset-buying program, we’ll see a major correction, while assurances that the stimulus program will continue may be a strong growth driver.”
Russia’s outgoing central bank chairman said today a single network of at least 1,173 sham companies is responsible for illegally channeling a minimum of 760 billion rubles ($24 billion) from the country.
The International Monetary Fund yesterday cut its growth forecast for Russia to 2.5 percent this year and 3.25 percent in 2014, compared with April predictions of 3.4 percent and 3.8 percent, respectively. The Washington-based lender cautioned the country against the danger of stoking inflation with fiscal stimulus, urging policy makers to improve the business climate.
OAO Mechel, Russia’s biggest coking coal producer, jumped the most in three months yesterday in New York after announcing a $100 million American depositary receipts buyback plan that would cost more than half its cash on hand. ADRs soared 9.9 percent to $3.12 yesterday, while shares added as much as 3.8 percent, before tumbling 0.9 percent to 97.20 rubles in Moscow.
The company, which had $170 million in cash at the end of March and $9.2 billion of net debt after posting a first-quarter loss, may struggle to pay for the buyback, according to Denis Gabrielik, an analyst at Otkritie Capital who plans to cut his rating on the stock to sell from hold.
“The question is where Mechel is going to get money for this buyback,” Allianz’s Popov said. “Investors may choose to use this moment to exit the stock.”
Even after surging, Mechel leads losses among Russian companies traded in the U.S. this year as declining output dims the outlook for earnings. Its ratio of net debt to equity, a measure of leverage, soared to 2.7 at the end of 2012, an unprecedented level for the company, according to data compiled by Bloomberg. Mechel’s preferred shares fell 2.4 percent to 54 rubles in Moscow.
OAO GMK Norilsk Nickel fell 0.7 percent to 4,711 rubles. Russia’s biggest producer of the metal declined 1.4 percent to $14.60. Nickel dropped in London.
OAO TMK, the world’s biggest pipemaker by output, rose as much as 3 percent, trading up 2.6 percent to 79.60 rubles. TMK replaced OAO OGK-2 in the 50-stock Micex and RTS indexes from yesterday.
The dollar-denominated RTS Index, which entered a bear market on June 5, dropped 1.7 percent to 1,291.72. Consumer services and utilities stocks were the biggest decliners among nine industry groups on the Micex, retreating 1.1 percent on average. OAO Magnit, Russia’s biggest food retailer, retreated 2.5 percent to 7,140.70 rubles, the most since June 3. The stock plunged 2.6 percent to $26 in London.
The 14-day relative strength index on the Micex fell to 43.6 after sliding to 31.4 last week, the closest since April to a level of 30, which signals a rebound to some analysts. On the Micex, 13 stocks increased, one was unchanged and 36 dropped. The volume of shares traded on the gauge was 29 percent below the 30-day average, while 10-day price swings subsided to 26.116.
Crude oil, Russia’s chief export earner, was little changed at $98.33, after a government report showed U.S. inventories unexpectedly rose last week. Brent for August settlement increased 0.1 percent to $106.14 a barrel on the London-based ICE Futures Europe exchange.
Russia’s economy grew 1.6 percent in the first three months, decelerating for a fifth quarter and missing the medium-term target of 5 percent set by Prime Minister Dmitry Medvedev, the slowest pace since 2009.
Bank Rossii held its refinancing rate at 8.25 percent on June 10. 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.
Out of 50 stocks on the Micex, one closed yesterday at a 52-week low and none at highs, according to data compiled by Bloomberg. Twenty-two stocks, or 44 percent, were trading above their 50-day moving average.
The Micex trades at 4.9 times its 12-month estimated earnings, having lost 10 percent this year, compared with a multiple of 9.8 for the MSCI Emerging Markets Index, which is down 10 percent.
The Russian Volatility Index climbed 4.1 percent to 28.74, the first gain in four days. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. dropped 1 percent to 86.16.