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Sberbank Leads Weekly Slump in Russian ADRs in New York

OAO Sberbank
A pedestrian passes an OAO Sberbank logo on display outside the bank's headquarters in Moscow. Photographer: Andrey Rudakov/Bloomberg

Russian companies trading in New York are set for the first weekly drop in a month on concern the world’s largest energy exporter will face further economic sanctions.

The Bloomberg index of Russian companies listed in the U.S. has retreated 3 percent this week, while the benchmark Micex Index has slumped 1.1 percent. American depositary receipts of OAO Sberbank, the nation’s biggest lender, tumbled 6.3 percent. OAO Mechel, Russia’s No. 1 producer of coal for steelmakers, extended a weekly slide to 6.5 percent.

NATO stepped up its criticism of Russia’s meddling in Ukraine, accusing the Kremlin of stoking ethnic unrest three days after the White House said President Vladimir Putin’s forces instigated the storming of government offices in the eastern part of the country. The Micex index entered a bear market on March 13, before a referendum in which people in the Crimea peninsula voted to break away from Ukraine. U.S. President Barack Obama imposed sanctions on Russian officials, including billionaires close to Putin, the following week.

“There are concerns over new sanctions and investors sell as they don’t want any additional risk,” Igor Nuzhdin, chief analyst at OAO Promsvyaz Bank in Moscow, said by phone yesterday. “The market is extremely nervous.”

Putin threatened to shut off gas deliveries through Ukraine unless European leaders took steps to stabilize the country. Ukrainian Prime Minister Arseniy Yatsenyuk’s pro-European cabinet has accused Russia of instigating tension in the regions near the Russian border in the run-up to next month’s presidential election.

Gazprom’s Shipments

Putin said Ukraine is heading toward default and that Russian gas export monopoly OAO Gazprom would halt shipments through the country if it continued to fall behind in payments, according to a letter he wrote to 18 heads of European states.

The legislative arm of the Council of Europe suspended Russia’s voting rights because of the annexation of Crimea, according to a statement posted yesterday on its website.

Ukraine’s benchmark dollar-denominated bonds due 2023 traded at 88.5 cents on the dollar yesterday, down from 92.8 cents at the end of March. The securities yielded 9.42 percent. Ukraine, which faces more than $9 billion in debt payments this year, sealed a preliminary bailout agreement with the Washington-based International Monetary Fund last month, envisaging as much as $18 billion in loans over two years.

The U.S. has imposed financial sanctions on Russian officials, including billionaires close to Putin, following the country’s takeover of Crimea last month. European Union leaders agreed on March 17 to impose sanctions on 21 individuals.

‘Buying Opportunities’

“People are hesitant to buy,” Chris Osborne, the New York-based chief executive officer at Sberbank CIB’s subsidiary in U.S., said by e-mail yesterday. “Political crises are historically good buying opportunities, but further sanctions, if they are serious, present an asymmetric downside for the Russian market.”

The Bloomberg Russia-US Equity Index fell 0.7 percent to 82.37 yesterday. The measure has tumbled 20 percent this year, compared with a 9.1 percent slide for the Micex gauge.

Sberbank retreated 1.6 percent to $9.01 yesterday, extending drop to 28 percent this year. Mechel ADRs fell 2.6 percent to $1.87 yesterday, trading 73 percent above the stock in Moscow. Gazprom increased 0.1 percent to $7.49, paring its drop for the week to 3.6 percent.

Future contracts on Gazprom’s Moscow-listed stock slid 1.4 percent in U.S. hours yesterday, while Sberbank futures declined 1.5 percent.

The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund that holds Russian shares, decreased 1.5 percent to $23.26 yesterday, widening its weekly decline to 2 percent.

The RTS Volatility Index, which measures expected swings in futures, increased 5 percent to 35.78 in U.S. hours. RTS stock-index futures expiring in June fell 1.5 percent to 115,530. United Co. Rusal, a Moscow-based aluminum producer, dropped 2.4 percent to HK$3.20 in Hong Kong trading as of 10:52 a.m. local time. The MSCI Asia Pacific Index fell 1 percent.

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