Russia Stocks Trim Worst Quarterly Slump in Year on Crude Gains

Russian equities rose, paring the worst quarterly drop in a year, as crude oil increased on signs of economic recovery in the U.S.

The 50-stock Micex Index added 1.3 percent to 1,330.46 by the close in Moscow, reducing its retreat in the quarter to 7.5 percent, the biggest loss since the period ended June 2012. The Russian Volatility Index, which measures expected swings in RTS futures, declined 3.7 percent, dropping for a fourth day.

Crude futures added 0.4 percent to $97.40 in New York, a fifth day of advances, as signs of economic recovery in the U.S. boosted the demand outlook in the world’s largest oil consumer. Russian stocks slumped this quarter and the dollar-denominated RTS Index entered a bear market on June 5 amid concern the U.S. Federal Reserve will taper stimulus. The Standard & Poor’s GSCI Commodities Index headed for a 5.9 percent quarterly drop. Russia is the world’s biggest energy exporter.

“It has been a tough quarter, the market got hit by the drop in credit liquidity in the developed markets and a drop in demand for commodities in the developing world,” Aleksei Belkin, who helps manage about $6.8 billion in assets as chief investment officer at Kapital Asset Management LLC in Moscow, said by phone. “Commodities slumped, people panicked and ran for cash.”

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The nation’s economy grew 1.6 percent in the first three months, the slowest pace since 2009. 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.

Stocks extended gains as the Thomson Reuters/University of Michigan final index of U.S. consumer sentiment beat expectations.

Fund Outflows

Russia-dedicated funds lost $285 million in the week ended June 26, the fifth week of outflows, according to a UralSib Capital e-mailed note, citing EPFR Global data.

OAO Mechel, Russia’s biggest coking-coal producer, increased 2.2 percent to 97.40 rubles, paring a 37 percent drop in the quarter, the second-biggest after OAO Raspadskaya, which posted a 48 percent slump.

Mechel has lost 52 percent this year as declining output dims the outlook for earnings after its ratio of net debt to equity, a measure of leverage, climbed to 2.7 at the end of 2012, an unprecedented level for the company, according to data compiled by Bloomberg. Coking coal, used to make steel, tumbled 42 percent over the past 12 months.

The Micex slumped on June 20 after 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.

Price Swings

Brent oil climbed 0.3 percent to $103.12 a barrel in London, a fifth day of gains. China’s CSI 300 Index is down 12 percent this quarter on concern higher money-market rates will increase funding costs for banks.

OAO Magnit, Russia’s biggest retailer, climbed 4.2 percent to 7,516 rubles for a 27 percent advance in the quarter, the biggest on the Micex. The shares surged 3.1 percent to $57.20 in London.

OAO Bashneft’s preferred stock has tumbled 15 percent this month as Vedomosti reported June 25 that OAO Rosneft, Russia’s biggest crude producer, may buy the oil company from billionaire Vladimir Evtushenkov’s AFK Sistema. Sistema Chairman Vladimir Yevtushenkov said he was unaware of the possible purchase when contacted by phone by Bloomberg.

Sistema had the third-biggest gain on the Micex this quarter at 10 percent. The stock fell 1.4 percent to 28.184 rubles today.

Price Swings

Rosneft became the world’s largest publicly traded oil producer by output in March when it bought TNK-BP from BP Plc and a group of billionaires in the country’s biggest acquisition. Rosneft Chief Executive Officer Igor Sechin proposed last month that the state-run company be accountable for TNK-BP’s dividends starting only from March 21, the day it acquired the venture in the $55 billion deal.

Out of 50 stocks, 36 increased and 14 dropped on the Micex. The volume of shares traded on the gauge was 17 percent below the 30-day average, while 10-day price swings dropped to 19.092, the lowest since June 6.

Four stocks on the Micex closed yesterday at a 52-week low and none at a high, according to data compiled by Bloomberg. Twenty-three stocks, or 46 percent, were trading above their 50-day moving average.

The Micex trades at 5 times its 12-month estimated earnings, having lost about 9.8 percent this year, compared with a multiple of 9.8 for the MSCI Emerging Markets Index, which is down 11 percent. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. climbed 0.3 percent to 83.92 today.