Russian shares sank the most in a month after a court sentenced Alexey Navalny, an opposition leader who spearheaded the biggest protests against President Vladimir Putin’s 13-year-rule, to prison.
The benchmark Micex Index declined as much as 2.1 percent from its intraday peak today, reversing gains after the decision. The gauge slid 1.1 percent to 1,416.63 by the close in Moscow, the most since June 20. The volume of shares traded was 52 percent above the 30-day average, data compiled by Bloomberg show, while 10-day price swings rose to 20.501, the most since June 27.
A judge in Kirov, 900 kilometers (560 miles) northeast of Moscow, handed down the five-year sentence after ruling that Navalny defrauded Kirovles, a state-owned timber company, of 16 million rubles ($494,000). Russian equities trade at the cheapest valuations based on estimated earnings among 21 emerging economies tracked by Bloomberg. The dollar-denominated RTS Index retreated 1.1 percent to 1,377.35.
“Navalny is the best-known Russian opposition figure,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd., said by phone in Moscow. “This signals that the government is erasing any political competition and the country doesn’t comply with the rule of law, which will push away investors.”
The Micex climbed as much as 0.5 percent earlier on speculation U.S. stimulus will be maintained. Federal Reserve Chairman Ben S. Bernanke said yesterday the central bank’s asset purchases “are by no means on a preset course” and could be reduced more quickly or expanded as economic conditions warrant.
OAO Sberbank, Russia’s biggest lender, fell 2.6 percent to 98.42 rubles, while the London shares tumbled 2.4 percent to $12.18. VTB Group, the second-largest bank, lost 2.2 percent to 4.689 kopeks. The stock retreated 2 percent to $2.91 in London.
The ruble weakened 0.2 percent to 32.4180 against the dollar, snapping three days of gains. The yield on benchmark OFZ bonds due February 2027 rose six basis points, or 0.06 percentage point, to 7.60 percent, their first advance in six days.
Bonds and the ruble are less affected by the court’s decision because currency and debt investors are guided by Russia’s limited reliance on foreign funding and its current account surplus, according to Nicholas Spiro, managing director at Spiro Sovereign Strategy.
“Russia’s saving grace is that its external funding position remains one of the strongest in the emerging-market space,” he said in e-mailed comments from London.
Russia is ranked the most corrupt nation among the Group of 20 advanced economies in Berlin-based Transparency International’s 2012 Corruption Perceptions Index.
Navalny’s sentencing “shows once again that the Russian government is centralized and it fights the opposition,” Aleksei Belkin, who helps manage about $4.4 billion in assets as chief investment officer at Kapital Asset Management LLC, said in Moscow. “It reminds us about Russia’s political risks, which make the market so volatile.”
Navalny, a lawyer and blogger who’s campaigned to expose fraud and waste at state companies and corruption by officials, is the most prominent opponent of Putin to face prison since former Yukos Oil Co. owner Mikhail Khodorkovsky, once Russia’s richest man. More than 10,000 people have signed up to attend a rally against Navalny’s sentencing near the Kremlin today, according to a Facebook Inc. page set up by the organizers.
“Although the Navalny news is negative, it was expected, especially by the local players,” Alex Debelov, chief investment officer at Moscow-based Third Rome LLC, which manages about $400 million in Russian assets, said by e-mail. “This will hardly help the privatization program, which already doesn’t shine with achievements this year.”
Revenue from asset sales will bring the budget about 630 billion rubles ($19 billion) in the next three years, including about 180 billion rubles in 2014, Economy Minister Alexei Ulyukayev said at a government meeting on June 27. That compares with a planned 925.9 billion rubles written into the three-year budget, according to the Economy Ministry.
Crude oil, Russia’s main export earner, advanced 0.5 percent to $106.98 a barrel in New York. Russia receives about 50 percent of its budget revenue from oil and natural gas sales. Fewer Americans than forecast filed applications for unemployment benefits in the week ended July 13, data showed today.
OAO Pharmstandard, the country’s biggest drugmaker, fell 3.4 percent to 1,672.10 rubles. The company completed its buyback program, acquiring an additional 1.3 billion rubles of stock as of July 16. That raised the amount purchased since February to 8 billion rubles and lifted its stake to 73 percent, the company said in a statement yesterday.
Pharmstandard shares tumbled 34 percent from July 8 to July 11 after the company said it offered $630 million for Bever Pharmaceutical Pte Ltd., without disclosing why, and announced the spinoff of its own branded, non-prescription drugs business. The shares plunged as much as 11 percent in London today before trading down 4.8 percent at $12.27.
The 50-member Micex’s 3.9 percent decline in 2013 compares with a 3.6 percent increase for India’s benchmark Sensex Index and Brazil’s Ibovespa Index’s 21 percent loss.
The 14-day relative strength index on the Micex retreated to 65 from 71 yesterday. The RSI measures how rapidly prices have advanced or dropped during a specified time period. Readings below 30 indicate a security may be poised to rise, while those above 70 signal a potential drop.
Fourty-two stocks, or 84 percent, were trading above their 50-day moving average on the Micex yesterday. None closed at a 52-week low and one at a 52-week high, according to data compiled by Bloomberg. The Russian Volatility Index, which measures expected swings in RTS futures, rose 1.5 percent today. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. fell 1.3 percent to 92.13.
The Micex trades at 5.3 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.