Bloomberg News

Russia Stocks Retreat Most in One Week on Commodities, Europe

October 19, 2012

Russian stocks dropped for the first time in four days, declining the most in a week, as commodities slumped and the European Union summit failed to boost investor confidence the region’s debt crisis will be contained.

The Micex Index (INDEXCF) slid 1 percent to 1,460.06 by the close in Moscow, paring its weekly gain to 1 percent. Basic metals and utilities stocks declined the most, losing more than 1.3 percent on average. OAO Severstal, a steelmaker, and aluminum producer United Co Rusal tumbled 2.2 percent and 2.3 percent, respectively. OAO Transneft, the oil pipeline operator, dropped 2.6 percent, the biggest decliner. AFK Sistema surged 2.8 percent as the company won’t participate in India’s 2G spectrum sale.

Oil, Russia’s main export earner, traded down for the second day, losing as much as 0.5 percent to $91.63 a barrel in New York. Most metals, including nickel, copper and tin, sank in London. A European Union summit failed to discuss further financial assistance for Spain, French President Francois Hollande said. Europe is Russia’s largest trade partner.

“The European Summit is the main concern for the Russian market,” Peter Szopo, head of research at Alfa Bank, said by phone. “Negotiations about Spain and banking regulation progressed but there was a lot of disagreement. Commodities are weak on the economic growth concerns.”

TNK-BP Detention

OAO TNK-BP Holding (TNBP), the traded unit of BP’s Russian venture, plunged as much as 3.8 percent before closing down 0.4 percent at 79.78 rubles. Police detained the head of the company’s government relations department on suspicion of seeking bribes to sell government posts. TNK-BP is aware of the man’s detention, which is not related to his work at the company, the press office said by e-mail.

The Russian Depositary Index (RDXUSD) of global depositary receipts traded in London fell 1 percent to 1,682.46.

Prime Minister Dmitry Medvedev said today the government will discuss the planned asset sales at the next meeting and the program is being finalized.

OAO Rosneft, Russia’s biggest oil producer, lost 2.4 percent to 214.20 rubles, while OAO Gazprom, the natural gas export monopoly, slid 0.5 percent to 154.57 rubles.

Russia may sell shares in Rosneft in 2013, 2014, Russian First Deputy Prime Minister Igor Shuvalov told reporters outside Moscow. Rosneft’s deal with BP Plc won’t affect Russian plans to reduce state shareholding in the oil company, Shuvalov said.

Rosneft submitted a bid yesterday to buy BP’s 50 percent of TNK-BP for a mix of cash and shares that values the whole venture at $50 billion to $56 billion, a person with knowledge of the matter said.

Nomos Soars

Nomos Bank rose as much as 3.8 percent before closing up 2.5 percent at 820.20 rubles, the biggest gain since Sept. 5. Otkritie Financial Corp. plans to buy minority stakes in Nomos Bank for $14 per global depositary receipt and will make an announcement within the next two weeks, said three people with knowledge of the plans.

OAO MRSK Holding lost 10 percent in the week, the biggest decliner. The board of directors recommended to sell new shares at 2.16 rubles a share.

OAO Raspadskaya was the second-biggest decliner, losing 4.9 percent. Credit Suisse Group AG, Deutsche Bank AG and HSBC Plc cut their recommendations for the coal producer this week.

Sistema rose the most this week on the Micex, gaining 5.9 percent. OAO Sberbank’s preferred shares advanced 4.3 percent, the second-biggest.

The Micex trades at 5.6 times estimated earnings after gaining 4.1 percent this year. That compares with a multiple of 10 times for the MSCI Emerging Markets Index, which has added 9.8 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: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net; 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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