Russia Stocks Decline as China Drags Down Oil, Novatek Jumps

Russian equities dropped as crude oil fell on concern China’s economic growth may be slowed by cash constraints and industrial stocks retreated.

The 50-stock benchmark Micex Index lost 0.7 percent to 1,290.26 by the close in Moscow, the lowest in more than a week. The Russian Volatility Index rose 9.6 percent. Industrial shares led the decline among nine industry groups, trading down 2.9 percent on average. Construction company OAO LSR Group sank 5.5 percent to 545.80 rubles, the most on the Micex.

Crude oil, Russia’s chief export earner, slipped as much as 1.1 percent to $92.67 a barrel as the People’s Bank of China said yesterday the nation should fine-tune its policies as a cash squeeze risks exacerbating an economic slowdown. Both Goldman Sachs Group Inc. and China International Capital Corp. cut their 2013 growth forecasts for China to 7.4 percent.

“There’s a sense in the market that the situation isn’t all that rosy,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “Oil is particularly sensitive to the risks of Chinese growth stalling.”

Data this week may show U.S. durable-goods orders rose and house prices continued to recover, according to Bloomberg surveys of economists, adding to the Federal Reserve’s case to scale back U.S. monetary stimulus later this year.

Russian stocks slumped on June 20 after the U.S. Federal Reserve Chairman Ben S. Bernanke said the regulator will probably taper its bond buying later in 2013 and halt purchases around mid-2014 if the world’s largest economy performs in line with projections.

China Deals

Bank Rossii held its refinancing rate at 8.25 percent on June 10 after inflation accelerated for a second month in May to the fastest pace in 21 months. Russia’s economy grew 1.6 percent in the first three months, decelerating for a fifth quarter and missing the medium-term target of 5 percent set by Prime Minister Dmitry Medvedev, the slowest pace since 2009.

OAO Novatek, Russia’s second-biggest natural gas producer, increased 3.9 percent to 348.60 rubles, the highest since Dec. 21. The shares added 2.5 percent to $117.40 in London. China’s China National Petroleum Corp. will receive a 20 percent stake in Novatek’s Yamal $20 billion LNG project, according to an agreement signed in St. Petersburg June 21.

OAO Rosneft surged 2.2 percent to 226.93 rubles, the highest since April 5. The global depositary receipts added 2.6 percent to $6.875. State-run Rosneft, the biggest publicly traded oil producer by output, signed a $270 billion supply deal with CNPC. The company will get a $70 billion prepayment under the deal, and will supply about 360 million metric tons of crude to China over 25 years, President Vladimir Putin said in St. Petersburg on June 21.

Bear Market

“China is a very important strategic partner,” Andrey Polischuk, an analyst at ZAO Raiffeisenbank, said by phone from Moscow. “Russia will only be increasing its gas and oil exports” to the country, he said.

The dollar-denominated RTS Index, which entered a bear market on June 5, retreated 1 percent to 1,233.04, the lowest since June 2012, after tumbling 3.7 percent last week. Russia’s stocks have the cheapest valuations among 21 emerging markets tracked by Bloomberg.

Brent declined 0.7 percent to $100.20 a barrel in London, the third day of declines. Urals crude lost 0.7 percent to $99.98.

Out of 50 stocks, 17 increased and 33 dropped on the Micex. The volume of shares traded on the gauge was 6.5 percent below the 30-day average, while 10-day price swings rose to 24.964.

U.S. Stocks

Three stocks on the Micex closed on June 21 at a 52-week low and none at highs, according to data compiled by Bloomberg. Sixteen stocks, or 32 percent, were trading above their 50-day moving average.

The Micex trades at 4.9 times its 12-month estimated earnings, having lost 13 percent this year, compared with a multiple of 9.2 for the MSCI Emerging Markets Index, which is down 16 percent.

The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. declined 1.4 percent to 81.20 today.