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Russia Stocks Retreat as Sberbank to Utilities Drop on Economy

Sept. 4 (Bloomberg) -- Russian stocks snappped two days of gains as concern slowing economic growth will hurt earnings drove down shares of power companies and OAO Sberbank, the country’s biggest lender.

The Micex Index slid 0.3 percent to 1,370.28 as of 2:38 p.m. in Moscow. OAO RusHydro, a renewable energy producer, lost 1.9 percent to 0.5403 rubles, while Federal Grid Co. slid 1.7 percent to 0.10402 rubles. Sberbank, which has the third-biggest weighting in the index at 12.5 percent, lost 0.5 percent.

Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg at 4.9 times 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index. Sberbank cut its 2013 profit outlook to 370 billion rubles ($11 billion) or less on Aug. 28. The country’s 2013 economic-growth forecast was reduced for the second time this year, Deputy Economy Minister Andrey Klepach said on Aug. 26.

“As a proxy of the Russian economy, Sberbank is a good example of how slower-than-expected gross domestic product growth affects business,” Nataliya Berezina, an analyst at UralSib Capital in Moscow, wrote in an e-mailed report today.

The volume of shares traded on the Micex was 49 percent above 30-day average today, data complied by Bloomberg show.

Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median forecast of 2 percent of economists surveyed by Bloomberg. The central bank refrained from cutting interest rates for an 11th month on Aug. 9, while highlighting “significant” risks to growth.

Power Demand

Utilities were the biggest decliners in the Micex, losing 1.3 percent on average. OAO Inter RAO sank for a second day, retreating 1.4 percent to 0.0115 rubles.

“The economy is growing at a slower pace and demand for electricity is likely to slow down,” Andrey Vashevnik, chief investment officer of Russian markets at R&B Russia Investment Fund Ltd, said in a a phone interview. “Limited government investment may mean that companies will have to make those investments on their own.”

Brent crude snapped two days of gains, declining 0.4 percent to $115.22 a barrel in London. Russia receives half of its budget revenue from the oil and natural gas industries. Oil fell as the U.S. debated a military strike on Syria and Russia raised objections to intervention, clouding the prospects for an attack that could heighten tensions in the Middle East.

OAO Lukoil, Russia’s second-biggest oil producer, slipped 0.5 percent to 1,931.30 rubles, while OAO Surgutneftegas fell 0.9 percent to 26.33 rubles. OAO Gazprom, the natural gas export monopoly, declined for a fifth day, dropping 0.2 percent to 131.02 rubles.

The Bloomberg Russia-US Equity Index of the most traded Russian stocks in New York fell 0.8 percent on Sept. 3, while the Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, traded at $25.86.

To contact the reporter on this story: Valeriya Ivashchenko in London at vivashchenk1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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