Bloomberg News

Russia Stocks Pare First Weekly Gain in Month on China Concern

May 25, 2012

Russian stocks retreated, paring the benchmark index’s first weekly gain in more than a month, as concern China’s biggest banks may fall short of loan targets outweighed bets Europe’s debt crisis will be contained.

The 30-stock Micex Index (INDEXCF) declined 0.2 percent 1,281.60 by the close in Moscow, giving it a 0.8 percent advance this week, the first increase in the period since April. OAO Federal Grid Co. slumped 16 percent in the week, while OAO Mobile TeleSystems climbed 6.2 percent amid speculation the mobile operator will become the fourth-largest stock on MSCI Russia’s 10/40 Index.

China’s biggest lenders may miss loan targets for the first time in at least seven years, according to three bank officials with knowledge of the matter. Oil futures rose 0.3 percent in New York, reversing an earlier decline. Italy’s Prime Minister Mario Monti told the country’s television station La7 yesterday a majority of European Union leaders at a meeting in Brussels this week backed joint euro-area bonds.

“Yesterday’s rebound was on weak hopes that something would come out of the euro talks,” Peter Szopo, head of research at Alfa Bank in Moscow, said by phone. “The European data yesterday disappointed, there’s hope that China will do something about monetary easing this weekend, but that’s weak support for the market.”

German business confidence fell more than economists forecast in May, data showed yesterday, while a separate report showed French business confidence sagged for a second month. The U.K. economy shrank more than initially estimated in the first quarter, according to yesterday’s report.

Fund Outflows

Oil prices may slip next week as the global economy slows amid rising U.S. supplies, a Bloomberg News survey showed. Russia, the world’s biggest energy exporter, received almost 50 percent of budget revenue from oil and gas sales last year, according to government estimates.

The dollar-denominated RTS fell 1.1 percent to 1,272.69. Russia was the first of the so-called BRIC countries to enter a bear market in 2012 last week after the RTS index fell more than 20 percent from a March 15 peak.

Redemptions at Russia-focused equity funds rose in the week through May 23 to $143 million compared with $52 million the week before, according to VTB Capital, citing EPFR data.

Trading volumes on the exchange declined this week, with 35 billion shares changing hands on the Micex today, according to data on the exchange’s website, down from 70.7 billion May 18.

Russian stocks trade at 4.4 times estimated earnings, having lost 8.5 percent this year. That compares with a 1.5 percent retreat for the MSCI Emerging-Market Index which trades at 9.2 times projected earnings.

MTS, Sberbank, Gazprom

MTS, Russia’s biggest mobile-phone operator, and AFK Sistema, its controlling shareholder, may be ranked together with the fourth-biggest weighting in MSCI Inc.’s Russia 10/40 index, Troika Dialog and VTB Capital said yesterday. The rebalancing will take place today and the changes come into effect May 31, according to MSCI. MTS gained 1.3 percent to 218.75 rubles.

OAO Sberbank fell 1.8 percent to 80.11 rubles. Dexia SA, the Franco-Belgian owner of Turkey’s Denizbank AS, said yesterday it has entered into exclusive negotiations with Sberbank, eastern Europe’s largest lender, to sell the unit.

Gazprom added 0.6 percent to 142.97 rubles after UBS AG added the stock to its “Key Call” emerging markets list, citing “attractive valuations and dividend yield,” and “improved control over cash operating expenditure.”

-- Editors: Alex Nicholson, Linda Shen

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

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


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