Cyprus Sinks Futures as Mechel Falls: Russia Overnight

RTS Index futures fell and OAO Mechel dropped to an almost four-year low in New York amid concern Cyprus’ bailout deal will lead to losses on the $60 billion of Russian loans and deposits in the island nation.

Futures on the RTS stock gauge expiring in June declined 0.2 percent to 140,670 in U.S. hours. American depositary receipts of Mechel, Russia’s biggest maker of steelmaking coal, dropped 2.7 percent to $5.13, the lowest level since April 7, 2009. The Bloomberg Russia-US Equity Index of the most traded Russian companies in the U.S. slid 0.7 percent to 97.04.

Cyprus agreed yesterday to shut its second-largest bank and tax deposits of more than 100,000 euros ($129,000) after lawmakers rejected an earlier plan. The new bailout is “clearly worse” for Russia, Bank of America Merrill Lynch said, reducing its recommendation on the nation’s equities to neutral. Cyprus is the biggest recipient of Russian investment abroad because of a double-tax avoidance treaty.

“Russia has shown the most painful reaction to Cyprus’ problems,” Ivan Manaenko, head of research at Veles Capital LLC, said by phone from Moscow yesterday. “Many companies, many individuals kept their money in Cyprus, therefore there is direct impact on the stock market. The market remains nervous as the outlook is unclear.”

Russian lenders and companies had about $31 billion in Cypriot banks by the end of 2012, according to a March 18 Moody’s Investors Service report, while another $29 billion has been given in loans to Cypriot firms with origins in Russia. Moscow’s benchmark Micex Index posted its steepest decline since May last week after Cyprus mooted taxing savings accounts to secure a 10-billion euro bailout from the euro area.

ETF Retreats

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, fell 1.1 percent to $27.46 yesterday in New York, the lowest level since Nov. 28. The RTS Volatility Index, which measures expected swings in the stock futures, declined 1.7 percent to 21.55.

Mechel’s preferred shares led declines on the Micex yesterday, tumbling 5.7 percent to 91.98 rubles, or $2.97, the lowest level on record. The Moscow-based company’s ordinary shares, which are equal to one ADR, dropped 3.4 percent to 158.10 rubles, or $5.11, the lowest level since April 6, 2009.

ADRs of OAO Sberbank, Russia’s biggest lender, fell 1.3 percent to $12.70 in New York, the lowest level this year. The depositary receipts settled at a 0.6 percent discount to the bank’s Moscow-listed shares, the biggest gap in five days. Sberbank slipped 0.7 percent to 98.66 rubles, or $3.19, in Moscow yesterday. Each ADR represents four shares.

While Sberbank’s CIB brokerage has a Cypriot unit, VTB Group, Russia’s second-biggest lender, is the “most exposed” to risks in the island nation because its subsidiary manages about $13.8 billion of assets, according to Moody’s.

Cyprus Levies

Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of 17 euro finance ministers, said imposing losses on depositors and bondholders must be part of the bailout toolkit after such measures were taken to avoid default in Cyprus. His comments, to Reuters and the Financial Times, were confirmed yesterday by Dijsselbloem’s spokeswoman, Simone Boitelle.

The euro-area group decided that the rescue package for Cyprus will require levies of as much as 40 percent on bank deposits of greater than 100,000 euros.

OAO GMK Norilsk Nickel, the world’s largest nickel and palladium producer, sank 2.9 percent to $16.29 in New York trading yesterday, the lowest close since Dec. 4. The company’s Moscow-listed stock dropped 2.2 percent to 5,046 rubles, or $163.11. One ADR represents one-10th of a Micex share.

Abramovich Report

Norilsk declined after RBC TV in Moscow reported that Roman Abramovich, a Russian billionaire who gained 20 percent of voting rights in the company in December, was being held by the Federal Bureau of Investigation yesterday. Abramovich wasn’t detained or arrested, an FBI spokeswoman who declined to be named on agency policy, said by phone. John Mann, a spokesman for the billionaire, said the report was “utter rubbish” when contacted by phone in Moscow.

Ruble futures showed the currency strengthening 0.3 percent to 31.89 per dollar in U.S. hours. Russia’s ruble declined 0.3 percent to 30.924 per dollar yesterday and gained 0.2 percent to 34.9011 against the dollar-euro basket used by the central bank to manage swings that erode exporter competitiveness.

Crude oil for May delivery rose 1.2 percent to $94.81 a barrel on the New York Mercantile Exchange yesterday, the highest settlement price since Feb. 19. Brent oil for May settlement rallied 0.5 percent to $108.17 a barrel. Urals crude, Russia’s major export oil blend, rose 0.4 percent to $105.97 per barrel.

United Co. Rusal, the world’s largest aluminum producer, dropped 3.4 percent to HK$3.94 in Hong Kong trading as of the city’s noon trading break. The MSCI Asia Pacific Index fell 0.1 percent today.

(Corrects bank title in third paragraph.)
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