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Russian stocks headed for their biggest decline this month as steelmakers slid on concern China will hold off easing monetary policy, damping investors’ appetite for commodities.
The Micex Index (INDEXCF) fell 1 percent to 1,429.59 by 1:46 p.m. in Moscow, set for the biggest one-day drop since July 31. OAO Novolipetsk Steel and OAO Magnitogorsk Iron & Steel slid more than 1.7 percent. OAO RusHydro, Russia’s largest hydropower company, tumbled 2.3 percent, the biggest decliner on the benchmark. Coal producer OAO Raspadskaya gained 0.5 percent.
Chinese new-home prices climbed in 49 of 70 cities tracked by the government, the most since May of last year, the National Bureau of Statistics said Aug. 18. The state bank has no intention of cutting lenders’ reserve requirements in the short term, as suggested by a cash injection last week, according to a weekend commentary in the central bank newspaper Financial News.
“The situation in China is causing investor concern, it’s unclear whether there will be more monetary easing,” Dmitry Postolenko, who manages $110 million in Russian assets at Kapital Asset Management LCC in Moscow, said by phone. “Russia depends on commodity prices and China is a very important player in that market.”
The dollar-denominated RTS Index (RTSI$) declined 0.9 percent to 1,404.59, falling for a second day.
OAO Mechel (MTLR), Russia’s largest producer of coal for steelmakers, dropped 1.5 percent to 210.30 rubles. President Vladimir Putin said at a meeting with coal companies that government agencies have to do “a lot” to cut corruption during licensing of fields such as Mechel’s Elga coal deposit.
Standard & Poor’s GSCI Commodity Index rose 0.3 percent to 669.41, heading for the highest level since May 2.
Crude oil, Russia’s chief export earner, was little changed at $96.14 in New York. Oil and gas contribute about 50 percent of Russia’s state revenue.
A Moscow court on Aug. 17 found performers for the Pussy Riot punk band guilty of hooliganism and inciting religious hatred and sentenced three members to two years in prison for performing a “punk prayer” in the country’s main Christian Orthodox cathedral urging Putin’s removal.
“Investors are not happy with the Pussy Riot trial but they are not surprised with the outcome,” Peter Westin, chief strategist at Aton Capital in Moscow, said by phone.
Governments from the U.S. to Europe have condemned the trial, while pop stars such as Madonna, Sting and Paul McCartney, whom Putin invited to the Kremlin in 2003 before a Red Square concert, have backed the band members.
The Micex trades at 5.3 times estimated earnings and has rallied 1.9 percent this year. That compares with a multiple of 10 times and a 6 percent advance for the MSCI Emerging Markets Index.
Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.
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