Micex Drops With Ruble as Sberbank Declines on EU Sanctions

Russian stocks and the ruble slid for a second day as OAO Sberbank fell after the European Union imposed sanctions on the nation’s biggest lenders.

The benchmark Micex Index dropped 0.4 percent to 1,374.83 by the close in Moscow, for a 1 percent retreat in the week and a third five-day decline. Sberbank fell 1.7 percent, while OAO VTB Bank slumped as much as 4.3 percent before closing up 0.5 percent. The ruble traded down 0.2 percent at 41.2538 versus the central bank’s target basket of dollars and euros by 6 p.m.

Russian assets are falling after Sberbank and VTB were named among five state-owned banks that will be blocked from selling bonds or shares in the EU, stoking concern slower lending will hobble growth. The central bank on July 25 increased its benchmark interest rate for the third time this year in a bid to stem capital outflows.

“Until we see an end to the conflict in Ukraine, the situation for Russia will only continue deteriorating,” Andrey Tretelnikov, an analyst at Rye, Man & Gor Securities in Moscow, said by phone. “Russian banks are being hit on all fronts, by sanctions, the central bank’s rate increase and the falling ruble.”

The EU and U.S. have been increasing pressure on President Vladimir Putin to get him to back down in Ukraine. The Micex lost 6.6 percent in July, the weakest monthly performance since May 2012. The ruble dropped 4.8 percent versus the dollar last month, the most among 24 emerging-market currencies. The currency was little changed at 35.7380 versus the dollar today.

“Because of the sanctions the demand for foreign currencies among companies has decreased,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said by e-mail.

MSCI Review

MSCI Inc. has introduced indexes that exclude Russia for clients seeking to avoid exposure to the country’s stocks, the company said in a statement late yesterday. It’s also reviewing VTB’s membership in its MSCI Russia Index.

“If MSCI has created indexes that exclude Russia, this is a bad signal,” Tretelnikov said. “What would prevent it from removing Russia altogether?”

While MSCI is due to announce its quarterly rebalancing on Aug. 13, the probability of a weighting downgrade for Russia is “low,” Iskander Abdullaev, an analyst at Sberbank Investment Research, said in an e-mailed note yesterday.

“The latest round of sanctions is negative for the image of VTB and Sberbank,” Yuri Selyandin, a money manager who helps oversee about $2 billion at GHP Group in Moscow, said by phone. “If VTB is excluded from MSCI, we’ll see a new wave of selling.”

‘Cash Machine’

OAO Mobile TeleSystems advanced 1 percent to 278.60 rubles. The company recommended a first-half dividend of 6.20 rubles a share, it said in a regulatory filing today.

“MTS’s cash machine works well and makes investors happy,” Selyandin said.

OAO GMK Norilsk Nickel fell 1.5 percent to 6,953 rubles, the second day of declines.

The Micex trades at 4.9 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.

Fourteen stocks traded above the 50-day moving average yesterday. One closed at a new 52-week high and one closed at a new 52-week low. Of 50 stocks on the Micex, two closed with a 14-day relative strength index above 70 and three with an RSI below 30.

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