Russian shares fell for the first time in five days as a deadlock in U.S. debt talks pared appetite for emerging-market assets.
The Micex Index lost 0.3 percent to 1,501.01 by the close in Moscow after rising to the highest since Feb. 20 yesterday. Utilities tumbled 0.5 percent, the most among nine industry groups. OAO Russian Grids slumped 4 percent to 88.4 kopeks, the lowest since March 2009. OAO Alrosa, Russia’s biggest diamond producer, slid 1.9 percent after rising 4.9 percent last week.
U.S. President Barack Obama said yesterday that the economy risks a “very deep recession” if Congress doesn’t raise the debt ceiling. Obama spoke after he called House Speaker John Boehner to “reiterate that he won’t negotiate on a government-funding bill or debt-limit increase,” said Brendan Buck, a Boehner spokesman. Crude oil fell 1.7 percent to $101.76 in New York. Russia receives about half of its budget revenue from the oil and natural-gas industries.
“The U.S. government dispute weighs on the Russian market, it increases risks,” Oleg Popov, who manages $1 billion of securities for Allianz Investments, said by phone in Moscow. “It’s the main driver for today’s declines. Russia is a bit late with its concerns about the stalemate, but we’re finally seeing a reaction after several days of gains.”
OAO Magnit, Russia’s biggest retailer, declined 0.5 percent to 8,660.7002 rubles, while its London securities decreased 0.6 percent to $65.60. Magnit said sales growth slowed in September amid increased competition and as new stores took business from old ones.
Federal Grid Co. tumbled 2.1 percent to 9.535 kopeks, the lowest since February 2009. Power stocks are falling after the government last month approved freezing utility prices in 2014 as Russia seeks ways to tame inflation, Allianz’s Popov said.
“The last investors are losing hope in the power sector,” he said. “With the tariff freeze, power companies have lost their incentive to develop, streamline their businesses and earn profits.”
Goldman Sachs Group Inc. cut Federal Grid to sell and reduced its estimates for its earnings before interest, taxes, depreciation and amortization by 5 percent for 2014 and 14 percent for 2015. The reduced profit outlook and “stretched” balance sheet won’t allow the company to pay “attractive” dividends, analysts including Moscow-based Artyom Golodnov said in the note.
Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the index trading at 4.4 times projected 12-month earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.
Ten-day price swings on the Micex climbed to 15.472 from 15.329 yesterday. The dollar-denominated RTS Index retreated 0.7 percent to 1,461.00.