Russia Stocks Fall 2nd Day Before Rates Meeting as Oil Slides
Russian stocks sank for a second day as oil, the country’s main export earner, fell and metal producers led declines before a central bank rates meeting.
The Micex Index (INDEXCF) lost 0.4 percent to 1,444.72 by 11:53 a.m. in Moscow, paring its gain to 1.5 percent in the week. OAO Mechel (MTLR), Russia’s largest producer of coal for steelmakers, retreated 2.1 percent to 111.90 rubles. United Co. Rusal, the world’s biggest aluminum producer, declined 1.4 percent to 100.37 rubles.
Russia’s central bank will keep the refinancing rate unchanged at 8.25 percent at a meeting today, according to 14 out of 22 economists in a Bloomberg survey. Climbing oil prices lifted Russian stocks last week amid concern a possible U.S. strike on Syria would disrupt supplies from the Middle East. Crude, Russia’s main export earner, fell 0.4 percent to $108.13 a barrel in New York as the U.S. and Russia started talks on a plan for Syria to surrender its chemical weapons.
“Russia saw a strong bounce amid the Syria tensions,” Slava Smolyaninov, a strategist at UralSib Capital in Moscow, said by phone. “Now we’re seeing commodities weakening, which is causing the stock market to retreat.”
Russia receives about half of its budget revenue from oil and natural gas sales. The Micex climbed 4.3 percent last week, its strongest advance since December 2011.
Eight economists in the Bloomberg survey forecast a cut to 8 percent. The main lending and deposit rates will also stay unchanged, two separate surveys show.
The Economy Ministry, which is seeking ways to curb consumer-price growth and spur expansion, has proposed freezing utilities’ prices next year. President Vladimir Putin supported the measure at a budget meeting on Sept. 11, Economy Minister Alexei Ulyukayev told reporters.
“The decision on the tariff freeze will likely be put into force, this will reduce inflation risks for the central bank,” Smolyaninov said. “The central bank is running out of excuses not to cut rates.”
Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median forecast for 2 percent. The central bank refrained from cutting interest rates for an 11th month on Aug. 9, while highlighting “significant” risks to growth.
Oil producer OAO Bashneft added 1.9 percent to 1,945 rubles, the biggest gain on the Micex. The amount of shares trading was equivalent to about 250 percent of the three-month average. Sky News reported yesterday that Vladimir Evtushenkov, who runs AFK Sistema holding company, which controls Bashneft, is considering a plan for the company to issue global depositary receipts in the U.K.
OAO Dixy Group, Russia’s third-largest food retailer, jumped 1.5 percent to 430.01 rubles. The company posted a 24 percent increase in August retail sales from a year earlier to 14.7 billion rubles, according to a statement yesterday.
Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg, with shares trading at 3.8 times 12-month estimated earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.
The volume of shares traded on the Micex was 12 percent below the 30-day average, while 10-day price swings rose to 19.451.
The dollar-denominated RTS Index lost 0.5 percent to 1,394.27. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York fell 0.7 percent yesterday, while the Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, lost 0.5 percent.
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