Russian equities retreated after OAO Uralkali, the world’s largest potash producer by output, fell as it neared the end of a $1.6 billion share buyback.
The benchmark Micex Index lost 0.7 percent to 1,407.41 by the close in Moscow. Uralkali decreased 2.5 percent to 193.99 rubles, the third day of declines and the lowest since December 2010. OAO Magnit, Russia’s biggest food retailer, slumped 3.5 percent to 7,958.90 rubles in Moscow and 3.4 percent to $58.90 in London.
Uralkali approved a one-year $1.6 billion share buyback program in November after the stock fell. The company has bought back about $1.3 billion of shares to date, according to a July 22 statement. Magnit surged 5.8 percent yesterday after quarterly profit rose 48 percent. The stock is the best performer on the Micex this year with an advance of 65 percent and trades at 21 times its 12-month estimated earnings, compared with 17 times for retailer OAO Dixy Group.
“Uralkali continues its slump because of the upcoming end to its buyback,” Vitaly Kupeev, an analyst at Allianz Investments in Moscow, said by phone. “Investors are selling Magnit because it’s been outperforming and it’s an expensive stock.”
Uralkali was reduced to neutral at Goldman Sachs Group Inc., which cited its outlook for “flat” potash prices until the end of the first quarter of 2014. Support for the stock is diminishing as the current buyback program nears its limit, Goldman said.
China’s manufacturing contracted at a faster pace in July, signaling a deepening slowdown in the world’s second-largest economy, according to an initial purchasing managers index compiled by HSBC Holdings Plc and Markit Economics.
OAO Magnitogorsk Iron & Steel Works fell 1.7 percent to 8.207 rubles. OAO Severstal declined 1.4 percent to 253.70 rubles in Moscow and 1.6 percent to $7.83 in London. OAO Raspadskaya tumbled 2.3 percent to 32.68 rubles after Goldman cut the stock to neutral from buy.
Crude oil, Russia’s main export earner, retreated 0.5 percent to $106.71 a barrel in New York. Russia receives about 50 percent of its budget revenue from oil and natural gas sales. Standard & Poor’s GSCI Index of commodities dropped 0.3 percent. The dollar-denominated RTS Index lost 0.8 percent to 1,369.36.
OAO Mechel, Russia’s biggest coking coal producer, added 2.8 percent to 100.50 rubles, the strongest advance on the Micex. The company said last month it plans to spend as much as $100 million on a yearlong share buyback to curb further declines in the stock, which has plunged 51 percent this year.
The Micex climbed 1.7 percent last week on speculation the U.S. Federal Reserve will keep stimulus in place. Russia’s equities trade at the cheapest valuations based on estimated earnings among 21 emerging economies tracked by Bloomberg.
While Bank Rossii kept its main rates unchanged on July 12, it introduced a one-year floating-rate facility with a starting cost of 5.75 percent, compared with its 7.5 percent fixed-rate for similar-maturity loans. Russia’s economy grew 1.6 percent in the first three months, spurring calls for easing.
The volume of shares traded on the Micex was 17 percent below the 30-day average, data compiled by Bloomberg show, while 10-day price swings retreated to 16.622. The 50-member Micex’s 4.6 percent decline in 2013 compares with a 3.4 percent increase for India’s benchmark Sensex Index and a 20 percent loss for Brazil’s Ibovespa Index.
The 14-day relative strength index on the Micex subsided to 60 from 64 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.
The Russian Volatility Index, which measures expected swings in RTS futures, dropped 3.3 percent, falling for a fourth day. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. decreased 0.6 percent to 92.53.
The Micex trades at 5.3 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.