Russian Consumer Companies Lead Quarterly ADR Drop as GDP Slumps

  • Electronic-payment processor Qiwi declines most in New York
  • Inflation around twice the five-year average saps spending

Russian stocks posted the worst quarterly decline in New York since the last three months of 2014, led by companies that make most of their sales domestically, as a shrinking economy, surging inflation and a weakening ruble crimped consumer spending.

The Bloomberg Russia-U.S. Equity index sank 16 percent in the third quarter. Qiwi Plc, the electronic-payment processor, tumbled the most, dropping 43 percent. Search-engine operator Yandex NV fell 30 percent, the second-worst performance. CTC Media Inc., the TV broadcaster that agreed to be bought by billionaire Alisher Usmanov, slumped 23 percent in a third straight quarterly decline.

Stocks tumbled as Russia, the world’s largest energy exporter, was beset by its first recession since 2009 amid falling oil prices and international sanctions linked to the Ukraine conflict. Wages adjusted for inflation have shrunk each month since November, while the annual rate of consumer price increases has remained at or higher than 15 percent in all of 2015. The ruble weakened 15 percent in the third quarter, reversing direction after a 5.1 percent gain in the previous three months. Russian retail sales contracted 9.1 percent in July and August, and 9.2 percent in June.

“The negative effects of the economic contraction impacted all industries in Russia, but consumer-oriented companies are the ones that suffered the most,” Sergey Libin, an analyst at ZAO Raiffeisenbank, said by phone from Moscow on Wednesday. “The consumer sector is taking a toll as soaring inflation and shrinking wages leaves people with less money to spend, and it doesn’t look like things will improve dramatically next quarter.”

Brent crude, the benchmark used to price Russia’s exports, fell 24 percent to $48.37 a barrel in the third quarter, less than half its five-year average price. Gross domestic product is forecast to contract 3.8 percent this year, according to the median estimate of 47 economists surveyed by Bloomberg.

Russia, which gets about half its government budget revenue from energy sales, also has been hurt by international sanctions imposed by the U.S. and its allies after President Vladimir Putin annexed Crimea from Ukraine in March 2014. The Micex Index gained for a second day in Moscow on Wednesday and the ruble strengthened amid speculation the country’s standoff with its former Cold War foes might ease if they cooperate in a military response to the Syrian crisis.

Qiwi slumped to $16.12, capping its worst quarterly performance since the stock started trading in New York in 2013. The company, which allows customers to make payments through prepaid accounts online and at kiosks and terminals, posted its weakest-ever revenue growth in September.

Yandex, Luxoft

Yandex fell to $10.73. The stock has slumped amid concern earnings could be hurt by Russia’s push to tighten government control of the Internet. In July, President Putin signed the country’s so-called “right to be forgotten” bill into law. It will allow people to ask search engines like Yandex to delete information they consider “unreliable” or is more than three years old from online search results, which could mean additional costs and possible fees for the company.

CTC Media fell to $1.75. The stock has tumbled 64 percent in 2015 as it faced a deadline to reduce its foreign ownership under tighter restrictions signed into law last year. The broadcaster this month said it plans to return about $255 million to shareholders including Sweden’s Modern Times Group AB and U.S. minority investors, after agreeing to sell the media company’s operations. The cash return will be financed by $200 million of proceeds from the sale of a majority stake to Usmanov, who also co-owns Internet company Mail.ru Group Ltd.

Luxoft Holding Inc., an information-technology services provider and software developer with most of its programmers in Russia and Ukraine, gained 12 percent in the quarter, extending its advance this year to 64 percent. With most of its revenue coming from the U.S. and Europe, the company has benefited from local currency declines. The stock has more than tripled to $63.29 since its June 2013 debut in New York.

Moscow-based aluminum producer United Co. Rusal added 2.6 percent to HK$3.11 at 10:36 a.m. in Hong Kong. The stock slumped 19 percent in the third quarter, extending this year’s loss to 40 percent, as metal prices tumbled.

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