Bloomberg News

Russian Stocks Drop on Central Bank Rates Decision, Lower Crude

April 09, 2012

Russian stocks dropped to their lowest level in almost three months as oil declined and the central bank’s decision to leave rates unchanged disappointed some investors.

The Micex Index of 30 shares fell 0.7 percent to 1,486.67 by 1:43 p.m. in Moscow, its lowest intraday level since Jan. 17 after erasing an earlier gain of as much as 0.6 percent. OAO Rosneft, Russia’s biggest oil producer, declined 0.8 percent percent. OAO Mechel (MTLR), the coalmaker, slipped 1.1 percent while OAO Sberbank (SBER), the nation’s largest lender, slid 1.9 percent.

Russia’s central bank refrained from cutting interest rates for a fourth month after signaling that “medium-term” inflation risks are increasing. The equity market was disappointed by the central bank’s inaction, according to Ivan Tchakarov, chief economist at Renaissance Capital.

“It does not want to appear soft exactly when it is trying to burnish its credentials of an institution that focuses much more firmly on targeting inflation,” Tchakarov wrote in e- mailed comments. “My view is that the Central Bank will overstay its welcome and will start cutting too late.”

Oil, Russia’s chief export revenue earner, declined as much as $1.51 to $101.80 a barrel in electronic trading on the New York Mercantile Exchange after Iran agreed to resume talks on its nuclear program and economic reports in the U.S. and China raised concern about fuel demand.

Bank Rossii left the refinancing rate at 8 percent, as predicted by 21 of 22 economists in a Bloomberg News survey. The overnight auction-based repurchase rate was kept at 5.25 percent and the overnight deposit rate will remain at 4 percent.

Russian stocks rallied by 8.2 percent in the first quarter, the biggest quarterly gain in more than a year on signs the global economy recovery is spurring demand for commodities. The Micex’s 6.3 percent slump in the last two weeks of the first quarter, its first two-week decline this year, was a “pullback” that created a “very compelling buying opportunity,” according to Richard Ross, a technical analyst at Auerbach Grayson in New York.

“Buyers are still out there looking for opportunities to get into the Micex, not to get out of the Micex,” Ross said.

The gauge trades for 5.8 times analysts’ earnings estimates for member companies, below the 10.7 ratio for the MSCI Emerging Markets Index.

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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