Tags: ruble | Russia | stocks | oil

Russian Stocks Fall Most in 5 Years in US as Ruble Drops 11 Percent

Monday, 15 December 2014 03:33 PM

Russian stocks slid the most in five years in the U.S. as concern mounted that plunging oil prices and a weakening currency will further harm an economy already forecast to fall into a recession next year.

The Bloomberg Russia-US Equity Index dropped 11 percent in its eighth day of declines at 1:45 p.m. in New York, set for its longest losing streak since October 2008. Oil producer OAO Surgutneftegas sank the most on the gauge, losing 21 percent. Crude fell to a five-year low as the United Arab Emirates said OPEC won’t rein in production. The ruble slid below 60 per dollar for the first time as traders tested the country’s willingness to defend the world’s worst-performing currency.

“We are probably already in a recession,” Oleg Popov, who helps oversee $1 billion at Allianz Investments in Moscow, said by phone. “As the currency’s collapse fuels inflation, undermines purchasing power and further slows the economy, all sectors of the stock market are getting sold off as if there is no tomorrow. The market is paralyzed with fear and is pricing in an unthinkable degree of risk.”

Russia’s $2 trillion economy has been deteriorating under penalties imposed by the U.S. and its allies to punish President Vladimir Putin for supporting a rebellion in eastern Ukraine, a claim he denies. Gross domestic product has been further crimped as the collapse in oil drove declines in the ruble, which fell 11 percent to a record 64.4455 per dollar today. The currency plunge and a ban on some food imports in response to the sanctions pushed inflation to 9.1 percent in November, the fastest in more than three years.

Surgut, Lukoil

Surgut dropped to $4.37 today, the lowest since October 2011. Oil producer OAO Lukoil slid 11 percent to $34.66 on trading volume that was more than double the full-day average of the past three months. The Market Vectors Russia ETF, the biggest exchange-traded fund tracking the country’s stocks, fell 11 percent to $13.99.

Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory, said a currency intervention on the scale of the $11 billion the central bank spent to prevent a possible collapse after Russia annexed Crimea in March is warranted.

“Otherwise the danger is that further ruble weakness may undermine the economy to a greater extent than is justified by otherwise sound financials,” Weafer, who was rated by a Euromoney Institutional Investor Plc poll as Russia’s best equity strategist in 2013, said by e-mail. “Equities are still speculative, but the current valuation is well below any justification based on even a depressed earnings outlook.”

Stock Valuations

Stocks on Russia’s Micex Index sell for 4.5 times projected 12-month earnings, the cheapest in emerging markets. The gauge has dropped 5.3 percent this year while the dollar-denominated RTS Index of the country’s stocks tumbled 50 percent in the worst performance among 93 equity benchmarks tracked by Bloomberg.

The U.S. Congress on Dec. 12 voted to impose tougher sanctions that authorize, while not requiring, the country to provide lethal assistance to Ukraine’s military as well as sweeping measures on Russia’s energy sector.

Russia, which gets about half of its budget revenue from oil and gas taxes, expects the economy may shrink as much as 4.7 percent in 2015, the Bank of Russia said in a Dec. 15 report. Inflation may quicken to 10.1 percent from a year earlier this month and reach 11.5 percent next quarter, according to the report.

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Russian stocks slid the most in five years in the U.S. as concern mounted that plunging oil prices and a weakening currency will further harm an economy already forecast to fall into a recession next year.
ruble, Russia, stocks, oil
Monday, 15 December 2014 03:33 PM
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