Bloomberg News

Russia Stocks Fall as Japan Deficit Widens, Greece Seeks Time

August 22, 2012

Russian stocks declined after Japan reported a wider-than-estimated trade deficit and as Greece sought more time on policy changes while investors awaited Federal Reserve minutes.

The Micex Index (INDEXCF) fell 0.5 percent to 1,446.84 by the close in Moscow, after rallying 1.8 percent yesterday. OAO Mechel (MTLR), Russia’s biggest producer of coal for steelmakers, slid 1.3 percent. United Co. Rusal, the world’s largest aluminum producer, dropped 1.5 percent, while OAO Novatek, Russia’s second-biggest producer of natural gas, declined 1.8 percent.

Japan reported a trade deficit of 517.4 billion yen ($6.5 billion) in July as Europe’s debt crisis curbed exports. The median forecast in a Bloomberg News survey of 28 analysts was for a shortfall of 270 billion yen. Stocks worldwide fell as Greece asked for more time to carry out policy changes. Prime Minister Antonis Samaras said his country needs “more air to breathe” in dealing with its debt crisis. The Fed will publish today minutes of the two-day meeting that ended on Aug. 1.

“The Japanese deficit figure doesn’t help the sentiment when the global growth outlook is looking uncertain,” Saad Siddiqui, an emerging-markets strategist at Credit Suisse Securities, said by phone from London. “There is uncertainty about the Fed’s actions, whether there will be more stimulus.”

Oil, the country’s main revenue earner, added 0.5 percent to $97.20 in New York. Preferred shares of OAO Surgutneftegas rallied 2.4 percent to 20.67 rubles.

WTO Entry

The World Trade Organization today formally accepted Russia, the world’s biggest energy exporter, as a member after 19 years of negotiation. Joining the Geneva-based body that sets global trade rules should drive bigger investment inflows, trade and higher competition in Russia, according to Fitch Ratings.

“The WTO accession does not drive the stock market immediately, however, over time, when investors pay more attention to Russia having joined WTO, Russia should be able to outperform emerging-market peers,” Marcus Svedberg, chief economist at Stockholm-based East Capital, which manages more than $4.4 billion in assets, said in a phone interview today.

Entry will boost stock valuations, narrowing the discount versus emerging-market peers to about 20 percent, the smallest in two years, according to Svedberg.

Troika Dialog expects consumer stocks to be the first to benefit from the WTO entry on lower import tariffs and the easing on import restrictions, according to an Aug. 21 report. The stocks set to benefit most include M.Video, OAO Aeroflot and OAO Mostotrest (MSTT), Chris Weafer, chief strategist at Troika Dialog in Moscow, wrote in an e-mailed report today.

Cheap Valuations

M.Video, an electronics retailer, was little changed at 265.47 rubles. Aeroflot, Russia’s biggest airline, rose 0.2 percent to 43.39 rubles while bridge builder Mostotrest sank 1.4 percent to 175.35 rubles.

Russian stocks pared losses after sales of existing homes climbed in July from an eight-month low, adding to signs U.S. housing may pick up in the second half.

The Micex trades at 5.1 times earnings after gaining 3.2 percent this year. That compares with a multiple of 12 times for the MSCI Emerging Markets Index, which has risen 5.7 percent.

Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.

To contact the reporters on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

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


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