Russian stocks fell from a three-month high after President Vladimir Putin said the government may raise OAO Gazprom’s capitalization, potentially diluting the holdings of existing shareholders.
The Micex Index dropped 0.3 percent to 1,470.70 by the close in Moscow after rising to the highest level since Feb. 25 yesterday. Gazprom retreated 0.9 percent and VTB Group lost 5.2 percent, the biggest decline in three months.
Gazprom’s eastern Siberian gas pipeline to China may be financed by additional capitalization or with an advance gas payment from China, Putin said yesterday at an energy meeting in Astrakhan, Russia. Stocks have rebounded to levels last seen before Putin’s incursion into Crimea in March as prospects of tougher U.S. and European Union sanctions fade.
“Gazprom shares will remain under big pressure since the government is planning additional capitalization, which may dilute existing shareholders’ stakes,” Vadim Bit-Avragim, who helps oversee about $4.1 billion at Kapital Asset Management LLC in Moscow, said by e-mail. “It’s a strange proposal since Gazprom has the capacity to build the pipeline to China without extra capitalization. ”
The Micex rose as much as 0.6 percent earlier after Group of Seven leaders yesterday spared Russia further sanctions in favor of diplomatic efforts to resolve the standoff over Ukraine. German Chancellor Angela Merkel, U.K. Prime Minister David Cameron and French President Francois Hollande plan separate meetings with Putin this week while all are in France for the D-Day anniversary.
“It’s positive that Putin is open to talks; it seems like he wants to save face and distance himself from what’s happening in eastern Ukraine,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd. in Moscow, said by phone.
The U.S. and the EU, which have imposed asset freezes and travel bans on 98 people and 20 companies, claim Russia is behind continuing unrest in eastern Ukraine in which the country’s prosecutor general says 181 people have been killed.
The Micex pared declines and the ruble rallied versus the euro after European Central Bank President Mario Draghi unveiled a financing package following cuts in interest rates. The ECB lowered the benchmark interest rate to a record low 0.15 percent and reduced the deposit rate to minus 0.1 percent, becoming the first major central bank to take one of its main rates negative.
Draghi said the ECB will introduce new, “targeted” offerings of liquidity to banks to encourage lending to the real economy.
VTB’s 14-day relative strength index yesterday jumped to 81.65, the highest since October 2010 and above the threshold of 70 that signals to some analysts a security is overbought. Its RSI was at 62.86 today.
“VTB was really overbought, that was apparent to everybody,” Anvar Gilyazitdinov, who manages a $10 million portfolio of Russian stocks at Rye, Man & Gor Securities, said by phone from Moscow. “It’s unclear where such growth had come from, perhaps there was a major buyer.”
VTB had gained 61 percent through yesterday since hitting this year’s low on March 12, compared with a rise of 16 percent for the Micex.
The Micex’s RSI dropped to 66.3 after reaching 68.1 yesterday, while 90-day historical volatility subsided to 29.9 today, according to data compiled by Bloomberg.
Russian stocks trade at 5.3 times estimated 12-month earnings, the cheapest among 21 emerging markets tracked by Bloomberg.
“My sense is that sentiment is still depressed, though it’s hard to say in the case of Russia since the market always trades on a substantial discount,” Peter Taylor, London-based senior investment manager at Aberdeen Asset Management Plc, said by e-mail today.