Russia’s Micex Caps Worst Monthly Drop Since 2012 on Sanctions

Russian stocks declined, extending the worst monthly drop in more than two years, as OAO Gazprom fell and the U.S. and European Union tightened sanctions.

The benchmark Micex Index dropped 0.2 percent to 1,379.61 by the close in Moscow, bringing its decline in July to 6.6 percent, the weakest performance in a month since May 2012. The ruble was little changed at 35.6025 versus the dollar as of 6 p.m. Gazprom, the biggest gas producer, fell 1.1 percent.

The U.S. this week announced penalties against three Russian banks, including VTB Group, and a state-owned shipbuilder. OAO Sberbank and VTB are among five Russian state-owned banks that will be prohibited from selling bonds or shares in the EU, according to a statement in the bloc’s Official Journal published after the market closed.

“It’s the end of a month during which we saw active selling on the expectations of sanctions,” Anvar Gilyazitdinov, who manages a $10 million portfolio of Russian stocks at Rye, Man & Gor Securities, said by phone. “The overall mood remains negative.”

On July 29, the EU prohibited state-owned Russian banks from selling shares or bonds in Europe, curbed the export of equipment to modernize the oil industry and banned sales of arms and civilian goods with military uses.

Russia’s economy is forecast to grow 0.5 percent this year, the slowest pace since a contraction in 2009, according to a Bloomberg survey.

‘Possible Effect’

The U.S. may limit derivatives trading and short-term loans with Russian companies if tougher penalties are necessary, said a Treasury Department official, who asked not to be named because further options are still being discussed.

“Since we don’t have the information on new sanctions, we can’t assess their possible effect,” Andrey Braginskiy, a spokesman at the Moscow Exchange, said by phone today.

The Micex’s 14-day relative strength index fell below 30 on July 28 and was at 35 today. The gauge trades at 5 times estimated earnings, making it the cheapest measure among 21 emerging markets tracked by Bloomberg. That compares with a multiple of 5.3 at the end of February, before Russia’s incursion in Crimea.

Fifteen stocks traded above the 50-day moving average yesterday. Two closed at a new 52-week high and none closed at a new 52-week low. Of 50 stocks on the Micex, two closed with an RSI above 70 and two with an RSI below 30.

OAO Bashneft rose 2.3 percent to 1,962.8 rubles. The oil producer’s board recommended delaying its additional share placement planned for autumn, citing “unfavorable” market conditions, according to a statement after the market’s close.

Yukos Award

A European court ordered Russia to pay 1.87 billion euros ($2.5 billion) for the seizure of Yukos Oil Co., once the country’s largest oil producer, adding to a $50 billion arbitration ruling announced this week. The $50 billion compensation Russia must pay the former owners of Yukos exceeds the market value of the government’s stake in any publicly traded company in Moscow, according to data compiled by Bloomberg.

OAO Severstal gained for a third day, rising 3.5 percent to 343 rubles. The steelmaker plans to pay about $1 billion in special dividends after selling U.S. assets, it said yesterday.

OAO Mechel dropped 2.3 percent. Russia has proposed two options to bail out the nation’s biggest coking coal producer. One envisages restructuring the company’s debt with the help of state bank Vnesheconombank and the other involves creditors taking an equity stake in the company, Kremlin economic aide Andrei Belousov said yesterday. Both proposals include a change in ownership structure.

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