Russian stocks fell for the fourth time in five days as investors weighed the risk of new sanctions over Ukraine. Yandex NV tumbled on concern its business may be hurt if the government regulates the Internet more tightly.
The Micex Index (INDEXCF) dropped 0.8 percent to 1,399.99 by the close in Moscow, the lowest since Sept. 1, after climbing as much as 0.7 percent. The dollar-denominated RTS Index (RTSI$) slid 0.9 percent. Yandex, Russia’s largest Internet company, lost 3.5 percent and Mail.ru Group Ltd. fell 4 percent in London. Lender OAO Sberbank retreated 1.7 percent to a one-month low.
U.S. and European Union sanctions have pushed Russia’s economy to the brink of recession and the country risks deeper penalties if separatists make further military gains in east Ukraine, according to a person familiar with German government policy. President Vladimir Putin said today Russia’s segment of the Internet must be protected from foreign threats by boosting the security of communications networks and preventing leaks.
“The market reacted to the risk of new sanctions, investors realize that it’ll be tough to lift them,” Dmitry Malykhin, who oversees $30 million in Russian assets at Moscow-based hedge fund Da Vinci CIS Opportunities, said by phone. “Yandex and Mail.Ru are falling on fears Internet freedom will be restricted.”
Russia’s economy will expand at a pace of 0.5 percent next year, the International Monetary Fund said today, cutting its previous growth forecast in half amid fallout from the conflict in Ukraine and a weaker ruble.
Russian shares retreated last quarter, with the RTS entering a bear market this week, as the billionaire owner of the AFK Sistema conglomerate, Vladimir Evtushenkov, was put under house arrest Sept. 16 amid a probe into alleged money laundering. Sistema, which lost two-thirds of its market value last month, gained 4 percent today, while preferred shares of its oil unit, OAO Bashneft, climbed for a second day.
VTB Group, the nation’s second-biggest lender, added as much as 2.8 percent before closing up 0.4 percent following a 3.1 percent drop yesterday. The central bank is weighing temporary capital controls if the flow of money out of the country intensifies, two officials with direct knowledge of the discussions said yesterday. The monetary authority denied it’s considering imposing limits on cross-border flows.
“Banks are especially sensitive to any capital controls talk and financial shares fell a lot yesterday and are rebounding today,” Sergey Vakhrameev, a money manager in Moscow at AnkorInvest LLC, said by phone. “Sistema is rebounding” from its losses, he said.
Russian U.S.-based exchange-traded funds received $64.94 million of inflows yesterday, the most in emerging markets, with $52.7 million going into Market Vectors Russia ETF (RSX), data compiled by Bloomberg show.
The last time the RTS fell 20 percent from its peak, entering what’s classified as a bear market, was in March when Putin’s annexation of Ukraine’s Crimea peninsula triggered the worst standoff with the U.S. and its allies since the Cold War.
The number of Micex shares trading above their 50-day moving average fell to 29 yesterday from 31 a day earlier, data compiled by Bloomberg show.