Russia Stocks Retreat Second Day Amid Growth Woes as Crude Falls

Russian equities fell for a second day as oil retreated and economic data stoked concern the recovery in the world’s biggest energy exporter is faltering.

The Micex Index lost as much as 0.4 percent before closing down less than 0.1 percent at 1,361.26 in Moscow. OAO Russian Grids fell 3.4 percent to 1.257 rubles. OAO Raspadskaya, a coal producer, sank 3 percent to 37.75 rubles.

Russia’s economy will probably expand 2.3 percent in the second quarter from a year earlier, according to the median estimate of 9 economists in a Bloomberg survey. That’s less than the forecast of 2.5 percent a month earlier. MSCI Inc. said this month it will remove Russian Grids, which has tumbled 36 percent this year, from its benchmark index for the country.

“Many investors prefer to refrain from buying Russia right now,” Slava Smolyaninov, a Moscow-based analyst at UralSib Capital, said by phone today. “In June, we’re hoping to see a turnaround in appetite. The central bank may cut rates and the situation in Europe may improve.”

Russia’s economy grew at the weakest pace since 2009 in the first quarter as the euro area’s longest recession hurt demand for commodity exports, federal data showed on May 17. Russia’s central bank kept its main interest rates on hold for an eighth month in May.

Crude, Russia’s main export earner, declined 0.7 percent to $92.45 a barrel in New York, falling for a second day. The U.S. economy expanded less than previously estimated in the first quarter and more Americans filed claims for unemployment insurance payments last week, reports showed today.

Novatek Buyback

OAO Novatek, the country’s largest non-state natural gas company, jumped 1.4 percent to 324.39 rubles. The company, which has a 4 percent weighting in the Micex, extended its share buyback program to June 7, 2014, according to a statement today. Novatek approved a one-year buyback of as much as $600 million of common shares and global depositary receipts on June 7, 2012.

“Support for Novatek’s stock will last longer now,” Alexei Kokin, an analyst at UralSib Capital, said by phone from Moscow. “According to our estimates, Novatek has spent about 10 percent of the planned amount on its buyback so far.”

The Micex tumbled the most in a year on May 23, the day after U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce the pace of its asset purchases if officials see signs of sustained improvement in growth. The Fed buys $85 billion of Treasury and mortgage debt a month to support the economy by putting downward pressure on interest rates.

Cheapest Valuations

The volume of shares traded on the Micex was 4.8 percent below the 30-day average, while 10-day price swings subsided to 29.607 from 32.224 yesterday the highest since May 2012.

Russian 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 7.7 percent this year, compared with a 10.8 multiple for the MSCI Emerging Markets Index, which has dropped 3.8 percent in the period.

The dollar-denominated RTS Index fell 0.7 percent to 1,350.42. The Russian Volatility Index added 0.8 percent to 25.37. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. declined 0.1 percent to 89.58 yesterday.

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