Russia Stock Valuations at ‘09 Low Versus Peers as Oil Tumbles

Russian stocks retreated for a fourth day, trading at their biggest discount since 2009 to peers as crude fell. Volatility dropped.

The Micex Index sank 0.5 percent to 1,352.37 by the close in Moscow, the lowest since June 28. The measure has retreated 13 percent from this year’s high on Jan. 28. Trading volumes were 49 percent above the 30-day average, while 10-day price swings declined to 15.128.

The benchmark Micex gauge is valued at 0.7 times net assets, compared with 1.5 for the MSCI Emerging Markets Index, the biggest gap since February 2009, according to data compiled by Bloomberg. The relative strength index on the Micex was at 22.4. A value below 30 signals the index is oversold and may reverse losses. Russia’s economic growth is forecast to slow to 2.4 percent this year on high interest rates and lower gas exports, Economy Minister Andrei Belousov told reporters on April 12.

“So far the news regarding the Russian economic slowdown isn’t encouraging,” Vladimir Bragin, head of research at Alfa Capital in Moscow, where he helps manage $2.9 billion, said by phone. “Investors are trying not to take on the risk of Russian stocks. When the market drops so much, there’s ultimately a rebound.”

Crude, Russia’s chief export, lost 0.8 percent to $87.97 per barrel in New York, declining for a fourth day. The Micex tumbled to a June low yesterday after China reported a slower pace of economic growth than analysts forecast, the National Bureau of Statistics said in Beijing yesterday.

Oil Dependent

“Commodity prices are very weak, and the Micex is mostly dependent on oil and metal stocks,” Bruce Bower, a partner at Verno Capital in Moscow, which manages about $200 million, said by phone today. “Last week’s Russian economic growth forecast cut surprised a lot of people. I would be cautious about thinking the Micex will rise this week.”

The S&P GSCI Spot Index of commodities slid for the fifth day, losing 0.4 percent. The dollar-denominated RTS Index fell 0.7 percent to 1,356.65. Consumer goods and telecom stocks led the declines among nine industry groups, losing at least 2.1 percent.

OAO M. Video, Russia’s biggest electronics retailer, retreated 3.9 percent to 227.97 rubles, the lowest since Dec. 10. OAO Sollers, a Russian automaker that works with Ford Motor Co., slumped 2.1 percent to 645.50 rubles.

LSR, Rostelecom

OAO LSR Group, a Russian property developer, fell 1.1 percent to 522 rubles. Citigroup Inc. cut the stock’s price estimate to $6.90 for global depositary receipts, citing economic growth concerns in a note today. LSR’s GDRs dropped 3.1 percent to $4.05. OAO Rostelecom, the state-run phone operator, dropped 5.2 percent to 107.66 rubles, the lowest since June 5. The shares tumbled 6 percent to $20.74 in London.

United Co. Rusal, the world’s biggest aluminum producer, surged as much as 7.6 percent before closing up 5.6 percent at 166.26 rubles. Most metals, including aluminum, advanced in London.

Russian fund outflows in the week ended April 10 were $393 million, the most since September 2011, according to an e-mailed note from UralSib Capital dated April 12, citing EPFR Global data.

Volatility Drops

The Russian Depositary Index added 0.1 percent to 1,573.19. Depositary receipts of AFK Sistema tumbled 1.5 percent to $18, while its ordinary shares closed down 0.9 percent to 24.96 rubles in Moscow. OAO Novolipetsk Steel’s depositary receipts gained 1.6 percent to $15.69. The ordinary shares increased 1.5 percent to 49.11 rubles in Moscow.

The RTS Volatility Index, which measures expected swings in stock futures, dropped 4.3 percent to 23.17, the first slide in seven days. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, added 0.4 percent to 26.03 today, while the Bloomberg Russia-US Equity Index rose 0.5 percent to 90.84.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5 times estimated earnings and has lost 8.3 percent this year, compared with 10.2 times for the MSCI Emerging Markets Index, which has slid 4.5 percent in the period.

Before it's here, it's on the Bloomberg Terminal.