Russia Micex Index Drops Second Day as Uralkali Leads Declines

Russian stocks fell for the second day, led by OAO Uralkali as the potash producer extended last week’s 16 percent slide after suspending a venture that controlled almost half of global exports.

The benchmark Micex Index decreased less than 0.1 percent to 1,391.75 by the close in Moscow, following a decline of 0.8 percent last week. The gauge earlier rose 0.6 percent while crude oil retreated as much as 1.2 percent to $105.70 in New York. Uralkali slumped 4.5 percent to 151.80 rubles. The London-traded shares declined 5 percent to $22.94.

Uralkali said on July 30 it would halt a venture with a Belarusian potash miner that controlled exports from the former Soviet Union, ending production restrictions that underpinned global prices and triggering a selloff in fertilizer producers’ shares. The stock has dropped 35 percent this year, compared with a decline of almost 6 percent for the benchmark.

“The entire market reality is changing for potash producers after Uralkali’s announcement,” Denis Gabrielik, an analyst at Otkritie Capital, said by phone from Moscow. “We expect the potash prices to drop” and Otkritie plans to review its hold rating on the shares, Gabrielik said.

Oil producer OAO Surgutneftegas fell 1.6 percent to 25.749 rubles and the London-traded shares retreated 2 percent to $7.77. OAO Acron, a Russian fertilizer producer, slid 2.3 percent to 1,074.60 rubles after slumping 8.8 percent last week.

China Data

The Micex earlier advanced as China’s non-manufacturing Purchasing Managers’ Index rose to 54.1 in July from 53.9, the first acceleration since March, according to government data on Aug. 3. Readings above 50 indicate expansion. Last week’s unexpected gain in a manufacturing PMI also bolstered confidence that Premier Li Keqiang’s policies are helping prevent a deeper slowdown in growth.

“The main concern for the Russian market was the fear of a Chinese slowdown since China is a major commodities importer,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd., said by phone in Moscow, before the market reversed the gain.

Russian equities trade at the cheapest valuations based on estimated earnings among 21 emerging economies tracked by Bloomberg.

OAO Severstal climbed 2.1 percent to 266.60 rubles, adding 1.6 percent to $8.08 in London. OAO Magnitogorsk Iron & Steel rose 1.6 percent to 7.991 rubles in Moscow and advanced 1.9 percent to $3.13 in London. Rallies, Russia’s largest electronics retailer, surged as much as 11 percent to the highest since the stock began trading in November 2007, before gaining 5.3 percent to 286.27 rubles, the most since April 2012.

The U.S. Federal Reserve pledged last week to continue the stimulus program that triggered a rally in emerging assets, while the European Central Bank and the Bank of England left interest rates unchanged. Bank Rossii will hold a rates meeting on Aug. 9 after keeping its main lending rates unchanged for a 10th month in July, as policy makers wait for inflation to drop within the target range of 5 percent to 6 percent.

Elvira Nabiullina, who took over as head of the central bank on June 24, is offering banks longer and cheaper funds to help funnel cash into the economy and boost growth. Russia’s gross domestic product grew 1.6 percent in the first three months of 2013, the slowest pace since 2009. Russia’s July Services PMI fell to the lowest since Aug. 2010, according to HSBC Holdings Plc data.

The dollar-denominated RTS Index dropped 0.2 percent to 1,333.42. The volume of shares traded on the Micex was 49 percent below the 30-day average, data compiled by Bloomberg show.

The measure trades at 5.3 times its 12-month estimated earnings, compared with a multiple of 10.1 for the MSCI Emerging Markets Index.