Russian Stocks Drop for 5th Day as Fed Tapering Bets Dent Ruble

Russian shares fell for a fifth day, the longest losing streak in seven weeks, on concern the Federal Reserve will further cut monetary stimulus this week, reducing demand for emerging-market assets.

The Micex Index declined 0.6 percent to 1,469.57 by the close in Moscow, taking the five-day drop to 2.3 percent. OAO GMK Norilsk Nickel, the world’s biggest producer of the metal, lost 2.2 percent to 5,345 rubles. Grocer OAO Dixy Group tumbled 4.6 percent at 332.99 rubles, as the volume of shares traded reached 3.2 times the three-month daily average.

The Fed starts a two-day meeting today at which policy makers are predicted to lower their $75 billion monthly bond-buying program by $10 billion, according to a Bloomberg survey of economists. The ruble extended it worst start to the year since 2009, raising the price of imported goods and the cost of servicing international debts.

“The attention of all market participants will be glued to the Fed’s comments,” Yuri Selyandin, a money manager who helps oversee about $2 billion at GHP Group Inc. in Moscow, said by phone. “The ruble’s decline had an especially strong effect on the retailers, since it has a negative impact on the consumers’ buying power.”

The ruble declined 5.5 percent this month and touched a five-year low 34.8620 per dollar yesterday. Russia’s economy grew 1.2 percent in the third quarter, the least in almost four years.

Dixy, Magnit

Dixy, the operator of discount food stores, said December sales growth slowed to 17 percent from 24 percent a month earlier, while 2013 revenue grew 23 percent. The stock is down 18 percent this month. Dixy’s weakness this month presents a buying opportunity, VTB Capital analysts led by Moscow-based Maria Kolbina said in an e-mailed note. “We view the unimpressive trading results as largely priced in,” they said.

The Micex Index advanced an average 77 percent during the Fed’s first two rounds of bond buying, and fell 0.6 percent in periods of no stimulus, the biggest difference of 46 emerging and developed markets tracked by Bloomberg.

OAO Magnit, the nation’s biggest food retailer, advanced as much as 3.7 percent before closing 0.8 percent higher at 8,230 rubles. Magnit posted a record profit margin in the fourth quarter on more favorable terms from suppliers, it said yesterday. The company said it will increase this year’s dividend to 40 percent of net income.

OAO Alrosa, the nation’s biggest diamond producer, jumped 1.6 percent to 36.31 rubles, the highest since Oct. 30. VTB Capital sees Alrosa being included in MSCI Inc.’s Russia Index in May, according to an e-mailed note.

The dollar-denominated RTS Index declined 1 percent to 1,332.51, the lowest since Sept. 4. Russian equities have the cheapest valuations among 21 developing-nation economies monitored by Bloomberg, with shares on the benchmark Micex trading at 3.3 times projected 12-month earnings, compared with a multiple of 9.1 for the MSCI Emerging Markets Index.

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