Russian equities retreated for a second day, falling to the lowest level in almost two weeks, as metal producers slumped and crude oil, the nation’s chief export earner, dropped.
The benchmark Micex Index lost 0.4 percent to 1,401.88 by the close in Moscow, the lowest since July 12. OAO Severstal declined 2.8 percent to 246.50 rubles in Moscow, the most since June 20, while OAO GMK Norilsk Nickel tumbled 2 percent to 4,623 rubles. OAO Mechel, Russia’s biggest coking-coal producer, lost 3.8 percent to 96.70 rubles, the most since June 21. OAO Novolipetsk Steel, Russian billionaire Vladimir Lisin’s metals company, sank 2.8 percent to 47.29 rubles.
Mechel 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 52 percent this year. Crude oil retreated 0.5 percent to $104.90 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 0.6 percent, the second day of declines.
“Mechel gained a lot yesterday, perhaps, on the start of the buyback, and traders are now reaping profits,” Oleg Petropavlovskiy, an analyst at BCS Financial Group in Moscow, said by phone. “Norilsk is being sold off and it’s a good opportunity to buy the stock. Severstal had rallied earlier in the week and is now coming back to its original levels.” Severstal gained 8.1 percent from July 19 through July 23 before dropping for two days.
The dollar-denominated RTS Index retreated 1.2 percent to 1,353.38.
Norilsk sank 2.2 percent to $14.15 in London. The world’s largest nickel and palladium producer may cut its 2013 dividend after a drop in nickel prices and a possible $1 billion drop in revenue this year, Chief Executive Officer Vladimir Potanin said in an interview with the Norilsk TV channel. NLMK fell 3.3 percent to $14.57 in London, the most since June 20.
OAO Uralkali, the world’s largest potash producer by output, approved a one-year $1.6 billion share buyback program in November after the stock fell. Uralkali decreased 3.9 percent to 186.41 rubles, the fourth day of declines and the lowest since December 2010.
The company has bought back about $1.3 billion of shares to date, according to a July 22 statement. The company’s net debt may climb to a record of two times earnings before interest, taxes, depreciation and amortization this year, according to UralSib Capital.
VTB Capital cut the stock to sell today, citing its reduced estimate for potash prices, according to an e-mailed note. Bank of America Merrill Lynch cut the stock to neutral, citing a lower potash price assumption and concerns the company’s lower free float may lead MSCI Inc. to trim the stock’s weighting in the Russia Index.
OAO Pharmstandard jumped 5.3 percent to 1,739.20 rubles, the most since July 15 and the strongest gain on the Micex. Russia’s largest drugmaker today posted a 2 percent increase in first-half sales, according to an e-mailed statement. The stock advanced 3.3 percent to $13.18 in London.
Pharmstandard tumbled 45 percent in London and 34 percent in Moscow 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 drugmaker completed a $247 million buyback after boosting ownership to 73 percent last week.
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 and published yesterday.
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.
Gross domestic product will advance 3 percent from a year earlier in the third quarter after expanding 2 percent in the second, the median estimate of 15 economists in a Bloomberg survey showed. That’s down from 3.1 percent and 2.1 percent in June’s poll. There’s a 30 percent chance of a recession in the next year, up from 20 percent a month ago, according to a survey of 13 economists.
The volume of shares traded on the Micex was 31 percent below the 30-day average, data compiled by Bloomberg show, while 10-day price swings slumped to 12.491, the lowest since July 10. The 50-member Micex’s 4.9 percent decline in 2013 compares with a 2 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 58 from 60 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, fell 1.9 percent, the fifth day of declines. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. decreased 0.8 percent to 91.50.
The Micex trades at 5.3 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.