Ruble Sinks to Record as Sistema Slides on State Seizure Concern

The ruble fell to a record and AFK Sistema shares slid as Russian prosecutors sought to regain ownership of the investment company’s oil unit, stoking concern the state will bolster its presence in the economy.

The currency weakened 1.6 percent to 39.0930 versus the dollar at 6:52 p.m. in Moscow, bringing this week’s drop to 1.7 percent. OAO Bashneft, controlled by billionaire Vladimir Evtushenkov’s Sistema, retreated 5.1 percent. Sistema tumbled 21 percent. OAO Gazprom rebounded after Russia and Ukraine struck a preliminary gas-price agreement that’s poised to enable supply through the winter.

The Moscow arbitration court froze Sistema and Sistema-Invest’s shares in Bashneft in connection with alleged violations during the state’s sale of its stake in the producer. Evtushenkov was put under house arrest Sept. 16 on money-laundering charges in a case that’s being compared with the 2003 arrest of Mikhail Khodorkovsky, which preceded the dismantling of his Yukos oil company.

“The prosecutors’ stance is really troubling for investors,” Anvar Gilyazitdinov, who manages $10 million in Russian equities at Rye, Man & Gor Securities in Moscow, said by phone. “More and more investors are disappointed in this story and are pricing in a negative outcome for Sistema.”

The Micex decreased as much as 0.8 percent, before paring it’s drop to 0.1 percent at 1,434.20. Gazprom erased a losses of as much as 0.9 percent to end 0.1 percent higher after Russia and Ukraine reached a preliminary natural-gas agreement, potentially ending a dispute that was set to disrupt flows during the winter.

Asset Law

“It’s positive for the sentiment that there’s a dialog between Russia and Ukraine, that there’s de-escalation of tension,” Sabina Mukhamedzhanova, a money manager at Promsvyaz Asset Management in Moscow said by phone.

Russian stock funds had $110 million inflows in the week ended Sept. 24, VTB Capital said in an e-mailed note today, citing EPFR Global data. Russian U.S.-traded exchange traded funds received $50.4 million of inflows yesterday, the most after Brazil, with $50.36 million flowing into Market Vectors Russia ETF, according to data compiled by Bloomberg.

The Micex gained 0.2 percent in the past five days, the first weekly increase in three. Sistema lost more than half its market value this month.

Russian shares fell yesterday after a lawmaker from Russia’s ruling party proposed legislation that could allow for the seizure of assets of foreign governments in the country. The ruble has lost 13 percent quarter-to-date, the steepest slide among 24 regional peers tracked by Bloomberg. The currency declined 1.2 percent versus the euro to 49.7025.

‘Remains Sensitive’

Ten-year government bonds retreated, pushing the yield up six basis points to 9.33 percent and trimming the decrease this week to 21 basis points.

“The market remains sensitive to political newsflow,” Tom Levinson, the chief foreign-exchange and interest-rate strategist at Sberbank CIB, said by e-mail. “The reports of Russia moving to pass legislation potentially allowing it to seize foreign assets is also relevant.”

A Moscow court ruled yesterday that Evtushenkov will be kept at home and won’t be allowed to make telephone calls. Sistema had planned to hold a share offering for Bashneft in London or Moscow this year to raise at least $1 billion, Bashneft Chief Executive Officer Alexander Korsik said in an interview on June 5. Sistema’s global depositary receipts slumped 23 percent in London.

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