Russia Stocks Sink 2nd Day on Bets Commodity Supercycle Fading – by Ksenia Galouchko (Bloomberg News – June 11, 2013)

Russian shares dropped for a second day on concern commodities may extend their decline, curbing growth in the world’s biggest energy exporter.

The Micex Index (INDEXCF) fell 1.4 percent to 1,317.20 by 11:31 a.m. in Moscow, the sharpest slide in almost a week. Basic materials companies led the retreat, losing 1.5 percent on average. The volume of shares traded on the gauge was 50 percent below the 30-day average, while 10-day price swings subsided to 16.497.

The Standard & Poor’s GSCI (SPGSCI) gauge of 24 raw materials retreated 0.5 percent as the Bank of Japan disappointed investors by failing to expand monetary stimulus and concern grew that the U.S. Federal Reserve will scale back debt purchases. Russian central bank Chairman Sergey Ignatiev, who presided yesterday over his last policy meeting after leading the regulator for more than a decade, kept key rates on hold for a ninth month.

“The market is falling on fears that we’re entering the end of the commodity cycle, that the rise of commodities is over,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “Russia is very closely correlated to oil.” The dollar-denominated RTS Index (RTSI$), which last week entered a bear market, declined 1.4 percent to 1,282.53. On the Micex, 3 stocks increased while 44 dropped, three were little changed.

Commodity Supercycle

The S&P GSCI Index is down 3.6 percent this year. The RTS will decline to 1,250 over the next twelve months as oil falls 5 percent a year, according to a note from Sberbank CIB analysts today. Rapid, investment-led growth in China is over, signaling the end of the “commodity supercycle” and implying a stronger dollar and weak commodity-market performance, according to Sberbank analysts.

Bank Rossii’s refinancing rate was held at 8.25 percent, the regulator said in a statement on its website yesterday. That matched the median estimate in a Bloomberg survey of 26 economists, with four predicting a quarter percentage point cut. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months, according to data last week.

The rates decision means that completing an easing cycle Ignatiev announced in April will fall to his successor, Kremlin economic aide Elvira Nabiullina, who takes over in two weeks.

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