Bloomberg News

Russia Stocks Drop Most in 2 Weeks on Moscow Troop Patrols, S&P

December 06, 2011

Dec. 6 (Bloomberg) -- Russian stocks sank the most in two weeks after Standard & Poor’s said it may cut the credit ratings of 15 euro countries and as Interior Ministry troops patrolled Moscow after election protests.

The Micex Index tumbled 4 percent to 1,457.90 by the close of trading in Moscow. OAO Gazprom, Russia’s gas-export monopoly slid 4.7 percent and VTB Group, the nation’s second-biggest lender, dropped 5.7 percent. The dollar-denominated RTS Index retreated 4.7 percent to 1,485.67.

Emerging-market equities retreated today after S&P put 15 countries, including Germany and France, on watch for potential rating downgrades, curbing appetite for riskier assets in developing nations. Troops today moved across Russia’s capital in “a planned rotation,” according to a ministry press officer, after thousands of people protested election results last night in one of the largest anti-government rallies in recent years.

“Investors are concerned that this will snowball into a concerted display of mass popular dissent,” Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said in an e-mail. “In a country with a history like Russia’s it’s only sensible to pay attention to developments like this, but perspective needs to be maintained.”

Russian Prime Minister Vladimir Putin’s United Russia party suffered its first election setback in a Dec. 4 parliamentary vote, winning 49.3 percent compared with 64.3 percent four years ago. The ruble sank 1.2 percent to 31.24 against the dollar, heading for its sharpest retreat in almost a month. OAO Sberbank, Russia’s biggest lender, fell 4 percent, its steepest drop since Nov. 21.

Police Patrols

Police detained around 300 people after yesterday’s rally and some 2,000 servicemen and 2,000 police officers have been on duty every day as part of reinforced security measures since the election, the duty officer at the Moscow police press service said by phone.

Putin, who is seeking to switch jobs next year with President Dmitry Medvedev by running for president, may have to contend with a more fractured legislature than when he was president between 2000 and 2008.

The Micex has lost 14 percent in 2011 and trades at 5.1 times estimated earnings. That compares with a 15 percent slide for Brazil’s Bovespa index, which trades at 10.5 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 11.1 times estimated earnings, and the BSE India Sensitive Index has a ratio of 14.4.

‘Buy Into Weakness’

The Micex’s decline today is an opportunity to “buy into the weakness,” CF Global’s Rimmer said.

Germany, France, the Netherlands, Austria, Finland and Luxembourg, the euro area’s six AAA rated countries, are among the nations being placed on “CreditWatch negative,” pending the result of a summit of European Union leaders on Dec. 9, S&P said yesterday.

“Investors collectively remain skeptical about how fixable the problems are in Europe,” said Lewis Kaufman, a Santa Fe, New Mexico-based money manager at Thornburg Investment Management, who oversees the Thornburg Developing World Fund. “There is relatively good value in a lot of blue-chip Russian stocks, but it’s very hard to quantify adverse developments in Europe and what they could mean if things go awry.”

Crude Oil

Crude for January delivery on the New York Mercantile Exchange declined 32 cents to $100.67 a barrel as of 6:15 p.m. Moscow time, erasing an earlier increase of as much as 0.3 percent. Prices are up 10 percent this year.

Brent oil for January settlement rose 8 cents to $109.89 on the London-based ICE Futures Europe exchange while Urals crude, Russia’s chief export blend, retreated 0.5 percent to $109.59. Oil and natural gas contribute about 17 percent of Russia’s gross domestic product.

OAO Rosneft, Russia’s biggest oil company, declined 4.1 percent to 215.55 rubles, the biggest drop since Nov. 21. OAO Lukoil, the largest private oil producer, fell 3.3 percent to 1,671 rubles.

The ruble depreciated for a fourth day, weakening 1.1 percent to 31.2050 against the dollar. OAO Sberbank, Russia’s biggest bank, retreated 4.3 percent, to 86.16 rubles. VTB dropped 5.7 percent to 6.74 kopeks, the biggest decline in the Micex Index today.

--With assistance from Leon Lazaroff in New York. Editors: Linda Shen, Gavin Serkin

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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