Russian stocks dropped to their lowest in more than two months as commodity prices fell and concern Europe’s debt crisis will worsen curbed bets on riskier assets.
The 30-stock Micex Index retreated 1.7 percent to 1,494.86 by the 6:45 p.m. close in Moscow, its weakest since Jan. 24. OAO Surgutneftegas (SNGS), the nation’s fourth-largest oil company, declined 3.3 percent. OAO Mechel, Russia’s biggest miner of steelmaking coal, plunged 6.1 percent. OAO Sberbank, Russia’s biggest bank and the largest stock in the index with a 15 percent weighting, lost 2.4 percent. The Russian Depositary Index (RDXUSD) of London-traded stocks fell 2.6 percent to 1,756.87.
Oil sank 1.9 percent to $103.4 a barrel in New York after sliding 1.8 percent yesterday as the Energy Department said crude inventories rose the most since July 2010. Greece will probably have to restructure its debt again and this may involve bailout partners such as European governments, said Moritz Kraemer, head of sovereign ratings at S&P.
“The market is struggling with a sombre outlook for commodities,” Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said by e-mail today. “Hedge funds are shorting metal and mining stocks and retail punters in Russia have been bailing out of the oil and gas sector.”
Sales of oil and gas account for almost 50 percent of the Russian government’s revenue last year and contribute 17 percent of gross domestic product.
Mechel sank to 260.5 rubles as coal prices fell and the miner said it started talks with lenders to obtain waivers and amendments to loans on the expectation falling prices caused it to breach financial covenants.
UBS AG downgraded Mechel’s stock today to neutral from buy and reduced its price estimate for the company’s American depositary receipts to $11.50 from $15.
“High financial gearing in the absence of a rising commodity-price environment puts pressure on the stock,” UBS analysts wrote in the report.
OAO Raspadskaya, a Russian coal producer, slid 4.5 percent to 109.13 rubles, its biggest one-day loss since November.
OAO GMK Norilsk Nickel (GMKN), the world’s largest producer of the metal, fell 0.8 percent to 5,346 rubles. Copper, aluminum and nickel declined on the London Metal Exchange.
Norilsk, which is also Russia’s largest mining company, is competing for a license in the Taimyr region, where it was founded, with billionaire Iskandar Makhmudov’s Ural Mining & Metallurgical Co., Interfax reported yesterday. UMMC overtook Norilsk as Russia’s largest copper producer last year.
The Market Vectors Russia exchange-traded fund (RSX:US), a U.S.- listed ETF that holds Russian shares, declined 1.6 percent to $30.14, the lowest level since Jan. 30.
The Micex is up 6.7 percent this year compared with a 12 percent advance for the MSCI Emerging Markets Index. (MXEF) The Micex trades at 6 times analysts’ earnings estimates for member companies compared with 10.9 for Brazil’s Bovespa index, which has gained 16 percent this year. The Shanghai Composite Index (SHCOMP) trades at 9.5 times estimated earnings, and the BSE India Sensitive Index (SENSEX) has a ratio of 15.1.
OAO Lukoil (LUKOY:US), Russia’s biggest non-state oil producer, lost 1.5 percent to 1,776.1 rubles. OAO Rosneft (ROSN), the country’s largest producer, dropped 1 percent to 205.09 rubles. The companies have a combined 21 percent weighting in the Micex.
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