Most Russia Stocks Drop as Utilities Tumble, Rostelecom Jumps

Most Russian equities fell as power stocks retreated on concern possible government tariff changes will hurt revenue. OAO Rostelecom surged to a three-week high as Russia may sell a stake in the telecommunications operator for at least $5 billion this year.

The Micex Index lost less than 0.1 percent to 1,372.04 by the close in Moscow, bringing its gain this week to 2.5 percent. Utilities declined 1.3 percent on average as a group. OAO Mosenergo, the dominant power supplier in the Russian capital, sank 1.6 percent to 1.16 rubles, while Federal Grid Co. lost 3.2 percent to 11.01 kopeks. Rostelecom added 5.5 percent to 117.47 rubles as First Deputy Prime Minister Igor Shuvalov said Russia may sell a controlling stake in the company as early as this year.

The government is searching for “compromise options” as it reviews planned increases in tariffs for gas, transport and electricity, Deputy Economy Minister Andrei Klepach told reporters today. The Economy Ministry is seeking a 6 percent increase in power tariffs for grid companies for 2014-2015 compared with 9 percent to 10 percent planned earlier, Interfax reported yesterday, citing an unidentified ministry official.

“For power companies, slower tariff growth means slower revenue growth,” Alexey Minaev, the head of research at Rye, Man & Gor Securities in Moscow, said by phone. “The news that the Economy Ministry is considering curbing tariff growth for these companies is very negative.”

OAO Gazprom, Russia’s biggest natural gas producer, tumbled 0.3 percent to 122.50 rubles. The Economy Ministry is seeking a 5 percent increase in gas prices for industrial users for 2014-2015 compared with 15 percent earlier, Interfax reported.

Dixy, Surgut

Out of 50 stocks on the Micex, 33 dropped and 17 gained. This is the first weekly advance for the Micex in six.

Crude oil, Russia’s chief export earner, retreated 1.3 percent to $92.44 a barrel in New York, the first drop in six days. Most metals fell in London, including tin and nickel.

OAO Russian Grids retreated 2.6 percent to 1.145 rubles.

OAO Dixy Group, Russia’s third-largest food retailer, lost 2.2 percent to 394.19 rubles. The company’s net income in 2012 fell 4.5 percent to 1.1 billion rubles compared with a year earlier.

OAO Surgutneftegas, an oil producer, surged as much as 2.5 percent, and traded 0.8 percent higher at 28.081 rubles. The company will report earnings based on international accounting standards for the first time since 2001 on April 30, it said on April 24.

Trading Volume

Rostelecom’s depositary receipts jumped 2.4 percent to $21.70 in New York, with volume of trading at about 1.5 times the three-month daily average.

OAO GMK Norilsk Nickel, Russia’s biggest producer of the metal, jumped 3.8 percent to 5,232 rubles, the second-most on the Micex. The board recommended paying 400.83 rubles per share in dividends for 2012, according to yesterday’s statement. The depositary receipts fell 3.3 percent to $15.53 in London as they traded without the right to a dividend.

The Russian Depositary Index retreated 0.9 percent to 1,581.71, the first drop in four days.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The measure trades at 5.1 times its 12-month estimated earnings and has lost 7 percent this year, compared with a 10.3 multiple for the MSCI Emerging Markets Index, which has dropped 3 percent in the period.

The number of shares traded on the Micex was 65 percent above its 30-day average, while the gauge’s 10-day price swings subsided to 17.491. The dollar-denominated RTS Index dropped 0.4 percent to 1,382.22.

The RTS Volatility Index, which measures expected swings in stock futures, fell 3.9 percent to 20.58. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, declined 0.6 percent to 26.20 today, while the Bloomberg Russia-US Equity Index retreated 0.6 percent to 92.99.

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