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Russia Stocks Drop to Month Low as Gazprom Retreats on Ukraine

Nov. 11 (Bloomberg) -- Russian stocks fell to the lowest level in more than a month as OAO Gazprom retreated after a report Ukraine’s state-run energy company halted purchases from the natural-gas exporter.

The Micex Index declined 0.4 percent to 1,483.46 by the close in Moscow, the lowest since Oct. 7, after dropping 1.7 percent last week. Of 50 stocks, 30 retreated, 19 rose and one was little changed. Gazprom, which has the biggest weighting on the Micex, lost 1.8 percent to 144.81 rubles. The shares fell 1.9 percent to $8.83 in London. Oil and gas shares led the drop on the Micex, losing 0.8 percent on average.

NAK Naftogaz Ukrainy’s gas purchases from Gazprom ended Nov. 8, Interfax reported today, citing data from the Russian Energy Ministry’s CDU-TEK central dispatch unit. Ukraine is due to sign an association agreement which includes a free trade pact with the 28-member European Union this month. Russia wants it to join an economic bloc in the former Soviet Union instead and has imposed more stringent checks on its neighbor’s exports.

“We’ve been hit with unpleasant news,” Alexei Kokin, an analyst at UralSib Capital in Moscow, said by phone. “All of a sudden Ukraine stopped buying Gazprom’s gas, this may be a bad signal for Gazprom’s local business.”

OAO Rosneft, the nation’s biggest oil producer, declined 0.8 percent to 243.87 rubles. The stock lost 1.5 percent to $7.40 in London.

OAO Moscow Exchange, the nation’s main bourse, rose 1.7 percent to 62.54 rubles after it was added to the MSCI Inc.’s Russia Index last week, effective Nov. 27.

Growth Slows

Brent climbed 0.6 percent to $105.74 in London, while West Texas Intermediate crude oil traded 0.1 percent lower at $94.51 in New York. Russia receives about half of its budget revenue from oil and natural gas sales. The Micex fell last week as Russia cut its average annual economic growth forecast to 2.5 percent through 2030 and the nation’s central bank left its main lending rates unchanged for a 14th month.

Bank of America Merrill Lynch cut its recommendation for Russia to a “modest” overweight from a “big” overweight on concern the price of Brent crude will drop, according to an e-mailed note dated Nov. 6.

American payrolls added almost twice as many workers as projected in October, data showed on Nov. 8, damping optimism for continued Federal Reserve stimulus.

“Fed tapering is the main fear in the market right now,” Mansur Mammadov, a money manager at Kazimir Partners, which oversees $300 million in assets, said by phone from Moscow.

The RTS Index retreated 0.5 percent to 1,427.93. 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.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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