Russia’s benchmark stock gauge extended its worst start to the year since 2008, led by energy companies, as oil declined and a report showed Chinese non-manufacturing growth slowed.
The Micex Index dropped 0.8 percent to 1,442.53 by the close in Moscow, the lowest since Dec. 5, taking this year’s decline to 4.1 percent. OAO Gazprom shares fell for a third day, sliding 2.4 percent to 141.57 rubles. OAO Rosneft, Russia’s largest oil producer, slumped 2.4 percent to 238.61 rubles. The two stocks have a combined weight of 20 percent in the Micex.
Emerging-market stocks have lost 7.4 percent in 2014 amid signs the Chinese economy is slowing as the Federal Reserve pushes ahead with reductions in stimulus. Brent crude slipped 0.5 percent after a 1.4 percent loss Jan. 31. Oil and gas sales provide about half of Russia’s budget revenue. Ukraine’s NAK Naftogaz Ukrainy owes Gazprom $658.4 million for supplies in January, according to a statement from the Russian company, citing preliminary figures.
“Falling Brent futures do not help,” Slava Smolyaninov, the chief strategist at UralSib Capital LLC in Moscow, said by e-mail. “The numbers from China are a blow for all emerging markets.”
The Micex has declined this year as Russia’s economy grew at less than half the previous year’s pace in 2013, falling short of economist forecasts.
Ukraine’s total gas debt to Gazprom for last year is $2.6 billion, according to the statement. Gazprom Deputy Chief Executive Officer Alexander Medvedev said Jan. 29 that Ukraine has missed the latest deadline for 2013 payments. Plans to hold talks with Ukrainian officials fell through after the government’s resignation, he said.
“The question is, how long will this debt continue to pile up,” Alexei Kokin, an analyst at UralSib Capital, said by phone from Moscow. “This damages the free cash flow, there’s always risk that Ukraine might not be able to repay the debts and Gazprom might have to forgive parts of the debt.”
The ruble has slumped 6.8 percent against the dollar this year, the second-worst performer among 24 emerging-market currencies tracked by Bloomberg. A weaker ruble encourages Russians to withdraw and convert local-currency deposits, while hurting retailers by making imports more expensive.
China’s non-manufacturing Purchasing Managers’ Index fell to 53.4 in January, the least since the gauge was created in March 2011, from 54.6 in December, adding to evidence that the world’s second-largest economy is slowing. A reading above 50 indicates expansion.
Fed policy makers reduced the pace of bond buying for a second straight meeting on Jan. 29. The Micex Index advanced an average 77 percent during the Fed’s first two rounds of debt purchases, and fell 0.6 percent in periods of no stimulus, the biggest difference of 46 emerging and developed markets tracked by Bloomberg.
OAO Magnit, Russia’s biggest retailer, rose 1.7 percent to 8,535 rubles. Lenta Ltd., the hypermarket chain controlled by U.S. leveraged buyout firm TPG Capital, said today it plans to sell shares in London, according to a regulatory filing.
Magnit’s global depositary receipts increased 1.5 percent to $53.55 in London by 3:17 p.m. Gazprom tumbled 3.4 percent to $7.98 in London.
“For Magnit, Lenta’s IPO is good for the sentiment because it serves as proof that despite the overall economic slowdown, this segment remains profitable,” Aleksei Belkin, who helps manage about $4.5 billion in assets as chief investment officer at Kapital Asset Management LLC in Moscow, said by phone. “I’m an optimist and think there’s room for the stock market to grow after a strong selloff.”
Lenta said it had an 11.4 percent margin on earnings before interest, taxes, depreciation and amortization last year, topping the 11.2 percent Ebitda ratio of Russia’s retail-industry leader Magnit.
The Micex’s 15-day relative strength index dropped to 33.61 today, moving closer to 30, a level that signals to analysts that a security might be oversold.
Russia-dedicated stock funds posted $230 million of outflows in the week ended Jan. 29, the seventh consecutive week of redemptions, UralSib Capital LLC said on Jan. 31, citing EPFR Global data.
The dollar-denominated RTS Index dropped 0.6 percent to 1,293.20. Russian equities have the cheapest valuations among 21 developing-nation economies monitored by Bloomberg. Shares on the Micex trade at 3.2 times projected 12-month earnings, compared with a multiple of 9.1 for the MSCI Emerging Markets Index.