Bloomberg News

Russia’s Micex Slumps Into Bear Market on Greece; Sberbank Drops

May 17, 2012

Russia’s Micex Index entered a bear market amid concern Greece’s financial crisis is worsening and as OAO Sberbank, the country’s biggest bank, tumbled after a policy maker said lending is stagnating.

The 30-stock Micex lost 3.5 percent to 1,287.79 by the close in Moscow. The gauge has declined 21 percent from this year’s March 14 high, breaching the 20 percent threshold analysts say marks a so-called bear market. Sberbank fell 7.2 percent, while the preferred shares of OAO Transneft, Russia’s oil pipeline operator, sank 6.5 percent.

The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as a political impasse threatens to force the nation out of the euro. Russia’s lending growth is beginning to slow as banks run short of capital, the central bank reduces currency interventions and the Finance Ministry runs a budget surplus, Interfax reported, citing a Bank Rossii official. Brent oil retreated.

“Uncertainty about what’s happening with Greece is dragging Russia along for a ride,” Ian McCall, a managing partner at Quesnell Capital SA, an emerging-markets investment adviser in Geneva that oversees 100 million Swiss francs ($109 million) said by phone. “It’s risk aversion generically. There’s concern with respect to what’s happening to the price of oil.”

Russia received almost 50 percent of budget revenue from oil and gas sales last year, according to government estimates. Brent traded down 0.3 percent at $109.38 a barrel.

Russian government officials met with reporters today to discuss Prime Minister Dmitry Medvedev’s trip to the U.S. for the Group of Eight summit.

Stagnating Growth

Sberbank, which has the third-biggest weighting in the Micex (INDEXCF), dropped to 80.63 rubles, the lowest level since Dec. 30.

Russian lenders’ capital adequacy ratio was at about 14.6 percent at the end of April, nearing an historical minimum and approaching the level reached on the eve of the 2008 crisis, Interfax said, citing Sergei Moiseyev, deputy head of the central bank’s financial stability department.

Russia-focused equity funds recorded this year’s biggest outflows in the week ended May 9, posting redemptions of $188 million, according to EPFR Global. The outflow may have risen to $300 million in the week ended May 17, according to Leonid Slipchenko, an UralSib Capital analyst.

Russian stocks retreated after an index of Philadelphia manufacturing unexpectedly declined and U.S. Conference Board’s gauge of leading indicators fell, indicating the pace of economic expansion may cool.

Bear Market

“Outflows from the Russian market continue and Sberbank is the main blue-chip that’s getting hit,” Slipchenko said by phone.

OAO MRSK Holding declined 6.1 percent as Russia’s competition watchdog said it’s “not against” a merger with Federal Grid Co. and following a report that Russia is delaying a revision of long-term tariffs for power Distributors.

The dollar-denominated RTS fell 4.4 percent to 1,313.43, the lowest level since Oct. 7 and the worst-performing index worldwide. The index’s 3.6 percent slide on May 14 saw it breach the bear market threshold.

“The global backdrop remains difficult,” VTB Capital analysts led by Alexey Zabotkin, said in an e-mailed note today. The market is “tuning” to the “less inconceivable possibility of Greece’s departure.”

Russia is the first of the so-called BRIC countries to enter a bear market in 2012. The BSE India Sensitive Index is down 13 percent from its peak and Brazil’s Bovespa Index is down 18 percent. The Shanghai Composite Index (SHCOMP) has been in a bear market for more than a year.

The MSCI BRIC Index (MXBRIC) for shares in Brazil, Russia, India and China slid for a fifth day to 260.73, the lowest level since Nov. 25. The index wiped out this year’s gains yesterday, as concern deepened that China’s economic growth is slowing and Europe’s debt crisis is spreading.

To contact the reporter on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

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


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