Russia Stocks Erase 2013 Advance as Banks, Crude Slide on Europe

Russian stocks erased this year’s gains as financial shares dropped and oil, the country’s main export, retreated after Italy’s election spurred concern Europe’s debt crisis will worsen.

The Micex Index sank 1.3 percent to 1,484.67 by the close in Moscow, the lowest level since Dec. 28. Of 50 stocks, 5 increased and 45 decreased. Financial and health-care equities led declines, losing 1.8 percent. OAO Sberbank, the nation’s largest lender and the biggest stock in the Micex by weighting, retreated 2.3 percent, while Bank Vozrozhdenie dropped 1.9 percent.

Oil in New York fell to a seven-week low, declining as much as 1.3 percent, and trading down 0.2 percent at $92.94 a barrel. Oil and natural gas account for about 50 percent of Russia’s budget revenue. Candidates seeking to reverse Italy’s austerity measures won about 55 percent of the popular vote in the nation’s election.

“Issues in the European Union will trigger capital outflows from riskier assets, like Russia,” Victor Markov, an analyst at Kapital Asset Management LLC, said by phone from Moscow. “The Italian elections have created a complicated situation where one party failed to get the majority of votes and now it’ll be very hard to pass any laws related to fixing the country’s debt issues. Oil is falling for the same reason.”

Economic Growth

Thirty-day price swings on the Micex increased to 12.393, while the number of shares traded on the gauge was 54 percent above the measure’s 10-day average, data compiled by Bloomberg show. Standard & Poor’s GSCI Index of raw materials declined 0.3 percent to 656.53.

Russia’s economy will expand 3.3 percent in 2013, less than the 3.6 percent forecast in the fall, the World Bank said in a report today. Output will begin to recover in 2014, with gross domestic product advancing 3.6 percent, the lender said.

Russia, the world’s largest energy exporter, has limited prospects to bolster growth through traditional channels as oil prices hold near record highs, according to the report. Europe is facing a deepening recession, while consumer-price growth in Russia is curbing the household spending that accounts for about half the economy.

Dividend Payout Group Ltd. gained as much as 4.6 percent in London as the Russian Internet company plans to pay $899 million in special dividends next month after reducing its stake in Facebook Inc. and exiting investments in Groupon Inc. and Zynga Inc. The amount of shares traded was about 1.2 times the three-month average., controlled by Russian billionaire Alisher Usmanov and part-owned by China’s Tencent Holdings Ltd. and South Africa’s Naspers Ltd., will pay investors $4.30 a share as of March 20, the Moscow-based company said today in a filing.

Polyus Gold International Ltd lost as much as 4.4 percent in London as Morgan Stanley cut the gold producer to equalweight, or the equivalent of hold, according to an e-mailed note today. Polyus has a “more demanding” valuation compared with Polymetal International Plc despite “riskier” cashflows and “more expensive” growth, the bank’s analysts said.

OAO Alrosa dropped 0.6 percent to 33.819 rubles after rising as much as 4.2 percent earlier. The diamond miner may be valued at as much as $10.8 billion as the Russian government looks to sell a 7 percent stake in the company in November, the Vedomosti newspaper said today, citing two unidentified bankers close to Goldman Sachs Group Inc. The stock has rallied 13 percent this year.

Qatar Fund

VTB Group fell 0.2 percent to 5.48 kopeks after surging as much as 1.8 percent earlier. Qatar’s sovereign wealth fund is seeking a discount to VTB shares of as much as 25 percent to current market price, Interfax reported today, citing an unidentified banking source.

The Telegraph reported earlier this month that VTB will issue $1.5 billion in new equity and $1.5 billion of mandatory convertible bonds to the wealth fund. VTB is meeting sovereign wealth funds and other investors to sell new shares totaling at least $3 billion, Russia’s First Deputy Prime Minister Igor Shuvalov said in an interview last month. VTB hasn’t received an investment offer from Qatar, RIA Novosti cited him as saying Feb. 21.

The Micex trades at about 5.6 times estimated earnings and has added 0.7 percent this year. That compares with a multiple of 10 times for the MSCI Emerging Markets Index, which has lost

1.1 percent over the same period.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, sank 2 percent to $28.78 yesterday. The RTS Volatility Index, which measures expected swings in the index futures, rose 0.4 percent to 19.98 yesterday. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. fell 1.1 percent.

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