Lower oil price fall, world economy woes drag Russian stocks down

MOSCOW, Jul 5 (PRIME) -- Russian stocks contracted on Tuesday against the background of a falling oil price and investors fleeing from risk because of concerns over the state of the world’s economy following the latest Chinese statistics and problems of Italian banks, analysts said.

The MICEX fell 0.62% to 1,895.64 and the RTS decreased 1.66% to 925.23.

“The mood at the international floors has significantly worsened. A wave of sales shoot past risky assets after several days of growth. The pessimistic mood was inflicted on investors right from the start of the day by China, where the business activity index fell to its 4-month low of 50.3 points in June from 50.5 in May,” Pavel Salas, general director for Russia and CIS at brokerage company eToro, said.

Traditional concerns about a cooldown in China transformed into concerns over economy of the whole world, which pushed investors to flee from risky assets, Salas said.

“The current sales on the local market were based on significant worsening of mood abroad. The most concerning factor of all is the oil price’s lockup way below the level of U.S. $50 per barrel,” Vitaly Manzhos, a senior analyst at Bank Obrazovanie, said.

The Brent oil price plunged 4.223% to $48.07 per barrel as of 5.59 p.m. Moscow time, according to the ICE exchange.

The oil was not only hit by China’s statistics, but also by resumption of oil production in Nigeria, meaning it is very unlikely that the price may return to above $50 any time soon, Salas said.

“Global investors were also focused on the problem of Italian banks, which account for about 33% of all bad debts of the E.U. Moreover, investors are very nervous about the ongoing weakening in the Chinese yuan due to an outflow of capital from the country,” Anton Kravchenko, a portfolio manager at managing company Raiffeisen Capital, said.

Shares of banks throughout the world fell, and Russian top bank Sberbank lost 2.04% to 131.85 rubles, Kravchenko said.

Shares of Federal Grid Company of Unified Energy Systems (FGC UES) lost 0.72% to 0.167 rubles after little-known company ProektStroy filed a suit seeking to declare it bankrupt over a 61 million ruble debt. Chances of the suit’s success are tiny, but it creates unnecessary legal risks for FGC UES, Manzhos said.

Agricultural holding Razgulay Group plunged 11.11% to 4 rubles after the company had filed a bankruptcy bid with the Moscow Arbitration Court on Monday, Manzhos said.

Below are the MICEX’ five most active stocks on Tuesday:

Company	Change, %	Last price, rbl	Trading volume, bln rbl
Sberbank	-2.04	131.85	5.854
Gazprom	-0.46	140.95	2.381
Norilsk Nickel	-0.59	8809.00	2.193
Lukoil	+0.89	2769.50	1.423
Surgutneftegas prefs	+1.37	39.54	1.186

(63.6844 – U.S. $1)

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