Russian stocks slid to the lowest level in a month as builder LSR Group and power company OAO Inter RAO UES dropped after MSCI Inc. cut them from an index tracked by investors.
The Micex Index fell 1.3 percent to 1,489.55, the lowest since Oct. 7, by the close in Moscow. Of 50 stocks, 43 declined and seven rose. Inter RAO slumped 5.1 percent to 0.84 kopeks, the weakest since March 2009, while LSR sank 6.3 percent to 550 rubles, the most since May 2012. OAO TMK retreated 1.4 percent to 87.08 rubles.
All three stocks were removed by MSCI in its index rebalancing announced late yesterday. The changes take effect after the close on Nov. 26. The Micex rallied the most in almost three weeks yesterday as the European Central Bank lowered its benchmark interest rate to a record 0.25 percent.
“Inter RAO, LSR are falling because of their removal from MSCI as fund managers adjust their holdings,” Oleg Popov, who manages $1 billion of securities for Allianz Investments, said by phone in Moscow. “The market gained a lot yesterday on the unexpected ECB rate cut, so today people are taking profits.”
OAO Moscow Exchange, which was added by MSCI, closed up 0.8 percent at 61.50 rubles. The stock has climbed 12 percent since its initial public offering in February. VTB Group gained 0.9 percent to 4.54 kopeks as MSCI increased its weighting to 2.86 percent.
Russia’s central bank left its main lending rates unchanged for a 14th month at its meeting today, matching the forecast of all 24 economists in a Bloomberg survey.
Policy makers have held rates for more than a year in a bid to tame inflation, which probably eased to 6.1 percent this month, the Economy Ministry said in an e-mailed report Nov. 1. The rate was 6.3 percent in October. Russia cut its average annual economic growth forecast to 2.5 percent through 2030, Economy Minister Alexei Ulyukayev said yesterday.
“A rate cut would be very positive for the economy, especially the banks need growth stimulus,” Allianz’s Popov said.
Russia-dedicated equity funds lost $53 million in the week ended Nov. 6, the largest weekly outflow since September, according to an e-mailed note from UralSib Capital, citing EPFR Global data.
The RTS Index dropped 2.3 percent to 1,435.12. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.2 times projected 12-month earnings, compared with a multiple of 10.4 for the MSCI Emerging Markets Index.