Russia’s Micex Extends Monthly Slump as Banks, Crude Oil Decline

Russian equities fell to the lowest in three weeks as crude prices dropped and financial shares tumbled amid fears of economic slowdown in the world’s biggest energy exporter.

The Micex Index sank 0.5 percent to 1,364.65 rubles by the close in Moscow, the lowest since Aug. 8 and a 0.8 percent retreat in the month. OAO Sberbank, the nation’s biggest lender, dropped 1.8 percent to 88.16 rubles, 7.4 loss in the month and the lowest since Nov. 29, while VTB Group declined 1.4 percent to 4.46 kopeks, the lowest since May 16.

The Micex gauge fell 2 percent this week after Russia cut its 2013 economic-growth forecast for the second time this year. Crude oil futures traded down 0.7 percent at $108.01 a barrel in New York after U.K. Prime Minister David Cameron failed to gain parliamentary backing for military action in Syria. Russia receives about half of its budget revenue from the oil and natural-gas industries.

“Investors are leaving the Russian market as they see an economic slowdown that cannot be fixed even by a rate cut or increased infrastructure spending,” Vladimir Bragin, head of research at Alfa Capital in Moscow, where he helps manage $2.9 billion, said by phone. “Banks are a derivative of the economy, it’s hard to expect growth in light of an overall economic slump.”

Fund Outflows

General emerging-market funds invested in Russian equities posted $171 million in outflows in the week ended Aug. 28, according to an e-mailed note from Sberbank CIB, citing EPFR Global data. Russian equity fund outflows have risen above $2 billion this year, Sberbank CIB said.

Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median forecast of 2 percent of economists surveyed by Bloomberg. The central bank refrained from cutting interest rates for an 11th month on Aug. 9, while highlighting “significant” risks to growth.

Sberbank stock traded in London lost 2.2 percent to $10.54. Sberbank cut its 2013 profit outlook to 370 billion rubles or less on Aug. 28. VTB slipped 1.5 percent to $2.65 in London, the lowest since September 2009.

“Should oil optimism and the war premium in the price abate, Russia risks losing more cash,” Slava Smolyaninov, an analyst at UralSib Capital, said in an e-mailed note. “Economic fundamentals remain weak.”

The MSCI Emerging Markets Index added 0.7 percent, paring a 2.1 percent drop in the month. Investors have withdrawn about $44 billion from emerging-market stock and bond funds from the end of May through last week as economic growth cooled and speculation increased that the U.S. Federal Reserve will reduce stimulus as soon as next month, according to data provider EPFR Global.

Moscow Exchange

OAO Moscow Exchange, Russia’s main equities and fixed-income bourse, added 0.8 percent to 61.01 rubles, the highest close since its February initial public offering and a 6.8 percent increase in the week, the biggest on the Micex. The company on Aug. 28 posted a 57 percent gain in second-quarter net income and plans to transfer all equities, Russian depositary receipts and exchange-traded funds to T+2 trading mode effective Sept. 2.

MSCI Inc. may add Moscow Exchange and global depositary receipts of OAO Pharmstandard to its emerging markets index during the November rebalancing as a result of a potential removal of additional minimum liquidity requirements for MSCI global standard indexes, MSCI said in an e-mail today. Pharmstandard’s GDRs advanced 1 percent to $14.79.

M.video, Rostelecom

OAO M.video, Russia’s biggest electronics retailer, gained 2.4 percent to 266.86 rubles, the second-largest advance this week on the Micex at 6.3 percent. Sales in the first half jumped 14 percent from a year earlier to 78.5 billion rubles ($2.4 billion), the company said Aug. 28.

M.video halted talks to acquire its rival Eldorado due to lack of consensus on terms and antitrust requirements to close certain stores if the deal proceeds, spokesman Anton Panteleev said by phone on Aug. 28.

OAO Rostelecom, Russia’s state-run telecommunications operator, retreated 5.5 percent to 102.10 rubles, the most since May 31 and an 11 percent decline in the week, the most on the Micex. The stock dropped 4.4 percent to $18.53 in London.

OAO Russian Grids sank 3.5 percent to 1.015 rubles, the second-biggest loss on the Micex this week at 11 percent. The distribution and transmission company posted a net loss of 1.8 billion rubles in the first half, compared with a 16.3 billion profit a year earlier, according to a statement yesterday.

Cheapest Valuations

OAO Inter RAO UES declined 3.2 percent to 1.16 kopeks, a 7 percent drop in the week. The partially state-owned Russian power company posted a net loss of 13.5 billion rubles in the first half, according to a statement today.

Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg at 5.2 times 12-month estimated earnings, compared with a multiple of 9.9 for the MSCI Emerging Markets Index. The dollar-denominated RTS Index declined 0.7 percent to 1,290.96.

The volume of shares traded on the Micex was 1.2 percent below the 30-day average today, while 10-day price swings rose to 10.791, data compiled by Bloomberg show.

The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York fell 0.3 percent today, while the Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, was little changed at $25.82.

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