Russia stocks sink to month-low as oil declines on economy, U.S.

Bloomberg News
Updated 11/21/2011 5:50 AM

Russian stocks fell, pushing the 30- stock Micex Index to the lowest intraday level in a month as oil prices declined for a third day amid signs of slowing global economic growth.

The Micex lost 3.3 percent to 1,412.13 as of 1:35 p.m. in Moscow, the third worst-performing equity index in the world today according to data compiled by Bloomberg. OAO Mechel, Russia's biggest coking coal producer, tumbled 4.9 percent, headed for the lowest closing price since Oct. 5. OAO Rosneft and OAO Lukoil, the country's two largest oil companies, both fell more than 3 percent. The dollar-denominated RTS Index declined 3.3 percent to 1,446.52.


Oil futures dropped 1.5 percent to $96.20 a barrel in New York. Japan, the world's third-biggest crude consumer, reported the first drop in exports in three months and Singapore said economic growth may slow next year. Spain voted to replace its government, while a U.S. committee may say today it failed to agree on cutting the federal budget deficit.

"There is now the understanding that personality changes in Italy and Greece are not a solution to structural problems," said Peter Westin, chief strategist at Aton Capital in Moscow. Europe's problems are "accompanied by a reminder of U.S. politics, where the super committee looks to be super stuck," he said.

Rosneft, Russia's biggest oil company, fell 4.4 percent to 205.85 rubles, poised for the weakest closing level since Oct. 25, while Lukoil lost 3.1 percent to 1,660.80 rubles. OAO Uralkali, a fertilizer producer, dropped 4 percent to 235.59 rubles, heading for the worst close since Oct. 6.

Cheapest market

The Micex index trades at 5.1 times analysts' earnings estimates for member companies, the cheapest of the 21 major emerging markets tracked by Bloomberg.

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Today's fall in the index "should come as no surprise," Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said by e-mail. "There's a dollar funding shortage which is diminishing the appeal of risk assets, foremost among them crude and Russian equities." Russian stocks "are always a leveraged play on global equity sentiment, and with crises present or looming in Europe, the U.S. and China, that sentiment is rotten right now," he said.

The Micex has lost 16 percent in 2011, compared with an 18 percent slide for Brazil's Bovespa index, which trades at 10.2 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 11.4 times estimated earnings, and the BSE India Sensitive Index has a ratio of 14. The MSCI Emerging Markets Index has fallen 20 percent this year.

Headline to headline

The ruble weakened 0.8 percent to 31.077 per dollar, heading for the weakest closing level since Oct. 20. Russia's $3.5 billion of Eurobonds due 2020 fell, pushing the yield up two basis points, or 0.02 percentage point, to 4.465 percent.

OAO Sberbank, Russia's biggest lender, dropped 3.2 percent to 77.51 rubles and VTB Group, the second-biggest bank, sank for a seventh day, sliding 4.9 percent to 6.47 kopeks.

United Co. Rusal, the world's largest aluminum producer, lost 3.8 percent to 234.01 rubles, the lowest intraday price since the depositary receipts started trading in December 2010, as prices for the metal dropped.

"Russia's still a high-beta play, and we're jumping from headline to headline," Tom Mundy, chief strategist at Otkritie Capital in Moscow, said by phone.

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