Russia Stocks Extend Worst Emerging Market Drop as Crude Falls

Russian equities fell for a second week led by the benchmark’s biggest companies as crude oil, the nation’s main exporter, retreated amid signs of a global economic slowdown.

The Micex Index fell 1.2 percent to 1,380.88 by the close in Moscow, the worst performance among emerging markets. It sank 1.5 percent in the week. The gauge tumbled 3.6 percent yesterday, the most in a year, after manufacturing in China unexpectedly contracted and as concern the U.S. Federal Reserve will crimp stimulus measures curbed appetite for riskier assets. OAO Sberbank, Russia’s biggest lender, decreased 2.5 percent to 103.01 rubles today, and OAO Gazprom, the nation’s largest company, lost 1.5 percent to 119.87 rubles.

Crude slipped 0.7 percent to $93.61 a barrel in New York, declining for a fourth day. The Standard & Poor’s GSCI Commodities Index retreated 0.4 percent. The volume of shares traded on the Micex was 25 percent below the Micex’s 30-day average, while 10-day price swings climbed to 28.906, the highest since Sept. 26. The Micex also dropped the most among emerging markets on May 23.

“There’s an absence of sentiment drivers, the Russian market remains weak, commodities are weak,” Dmitry Malykhin, who oversees $30 million in Russian assets as chief investment adviser at Moscow-based hedge fund DV Advisers LLC, said today by phone. “Sberbank is a good company, but whenever people have fears about the Russian market, they sell it.”

Fund Flows

Russia-dedicated funds posted $18 million in inflows in the week ended May 22, UralSib Capital said in a note today, citing EPFR Global data. That compares with $339 million last week, according to the note.

OAO Rostelecom, Russia’s state-run phone company, lost 2.9 percent to 106.55 rubles, the lowest since April 19. The volume of shares traded was about 1.1 times the three-month daily average. Its global depositary receipts declined 1.8 percent to $20.24.

The Russian Depositary Index retreated 1.3 percent. GDRs of Sberbank fell 2.2 percent to $13.19. VTB Group lost 1.9 percent to $3.002 in London. The second-biggest Russian lender sold 102.5 billion rubles ($3.3 billion) of shares on the Moscow Exchange in an offering that closed on May 22. Local shares tumbled 1.9 percent to 4.689 kopeks, falling for a second day.

Russia’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.1 times its 12-month estimated earnings and has lost 6.4 percent this year, compared with a 10.4 multiple for the MSCI Emerging Markets Index, which has dropped 2.8 percent in the period.

The dollar-denominated RTS Index declined 0.9 percent to 1,388.52. The RTS Volatility Index, which measures expected swings in stock futures, jumped 5.6 percent to 24.50, the second day of gains. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. retreated 0.9 percent to 91.84 today.

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