Russian stocks set for weekly fall

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MoscowExchange Reuters. The bell rung at the beginning of trading sessions is seen in front of the logo of the Moscow Exchange.

Moscow - Russian shares headed for a third weekly decline as OAO Mobile TeleSystems slumped on concern the country’s largest mobile provider will lose market share.

The Micex Index dropped 0.8 percent to 1,416.23 by 5:50 p.m. in Moscow, set for the lowest level since December 4 and a 1.6 percent fall in the week.

Trading volumes were 73 percent above the 30-day average, while 10-day price swings fell to 9.225, the lowest since February 12.

The dollar-denominated RTS Index retreated 0.8 percent to 1,407.61.

Mobile TeleSystems, also known as MTS, tumbled 3.8 percent to 260.19 rubles, poised for the biggest drop since May 30, while mobile operator VimpelCom Ltd. lost as much as 1.2 percent in New York trading.

VTB Group, Russia’s second-biggest lender, said yesterday it had completed a $3.55 billion acquisition of Swedish Tele2’s wireless business in Russia, fuelling speculation the unit will be sold to state-run OAO Rostelecom.

VTB declined 1.8 percent to 4.64 kopeks in Moscow and dropped 2 percent to $2.878 in London.

“There’s a risk of an appearance of a new player in an already overly-saturated market,” Ksenia Arutyunova, an analyst at Rye, MAN & Gor Securities, said by phone from Moscow.

“If Tele2 merges with Rostelecom, it’ll create a major competitor for MTS, MegaFon and VimpelCom.”

The bank may resell the company to Moscow-based Rostelecom in six to eight months once a merger with Svyazinvest is completed, Renaissance Capital has said.

 

Mobile Giant

 

VTB is in talks with Arkady Rotenberg, an investor in Rostelecom, to set up a joint venture with Tele2 Russia, the Vedomosti newspaper reported today, citing people it didn’t identify.

A joint venture would create Russia’s fourth-largest mobile operator and Rostelecom has both 3G and 4G licenses, Vedomosti said.

“A new mobile giant may appear,” Alfa Bank analysts said in an e-mailed note today.

OAO MegaFon, Russia’s second-largest mobile-phone operator, tumbled the most on record in London trading. The shares lost 8.6 percent to $27.11. JPMorgan Chase & Co. cut the stock to neutral on “pricey” valuations.

Russian equities extended declines after US employers hired fewer workers than forecast in March, Labor Department data showed today.

Crude oil slid as much as 1.5 percent, trading down 1 percent at $92.37 in New York.

Russia receives about half its budget revenue from oil and natural gas.

Out of 50 stocks on the Micex, 19 rose, 30 fell and one was unchanged.

OAO Rosneft, Russia’s largest oil producer, dropped 3 percent to 230.04 rubles.

The stock retreated 3 percent to $7.215 in London. OAO Gazprom, the natural-gas export monopoly, lost 0.6 percent to 130.37 rubles.

 

HSBC Cuts

 

HSBC Holdings Plc cut Russian equities to neutral in a report dated April 4, citing its exposure to the European crisis, a high inflation rate and slowing output.

Russia’s inflation rate in March fell to 7 percent from 7.3 percent in February, which was the highest in 18 months, according to Federal Statistics Service data.

Russia’s fourth-quarter economic growth slowed to 2.1 percent, data showed on April 2.

Russian equity funds posted outflows of $73 million in the week ended April 3, according to an e-mailed note from VTB Capital, which cited EPFR Global data.

 

Magnit Rises

 

The Russian Depositary Index declined 0.8 percent, with AFK Sistema’s depositary receipts slumping 3.9 percent.

OAO Magnit’s depositary receipts surged 1 percent as Russia’s largest food retailer by market value plans to open almost 10,000 stores in the next five years the Krasnodar, it said in e-mailed response to questions today.

The RTS Volatility Index, which measures expected swings in stock futures, dropped 2.3 percent today.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, fell 1.6 percent to $26.61 today.

The Bloomberg Russia-US Equity Index tumbled 1.2 percent to 93.57 today.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg.

The Micex trades at 5.2 times estimated earnings and has lost 4 percent this year, compared with 10.2 times for the MSCI Emerging Markets Index, which has slid 4.8 percent this year. - Bloomberg News



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