Ruble Russia’s Micex Drops on Ruble, Economy Concern; Sberbank Falls

Russian stocks dropped, triggering a trading halt in the Micex Stock Exchange for a second straight day, on concern that a weakening ruble and worsening recession will fuel loan losses for banks.
OAO Sberbank tumbled to the lowest in four years. The nation’s biggest bank said bad loans will probably reach 10 percent of overall lending by the end of next year. OAO Lukoil slumped 8.1 percent as crude traded below $35 a barrel. OAO GMK Norilsk Nickel dropped 13 percent as nickel prices neared the level that makes the company unprofitable.
The 30-stock Micex Index lost 5 percent to 612.65 at 3:25 p.m. in Moscow. The exchange earlier shut trading for an hour. The index dropped 16 percent in three consecutive days, the longest losing streak this year. The RTS Index sank 6.6 percent to 515.79.
“Sberbank has been undermined by the ruble, and the suspicions remain that the bank will be used to subsidize the Russian economy,” said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. “Banks generally are out of favor everywhere, and the view from here is dreadful.”
The Economy Ministry yesterday said the recession will deepen, forecasting gross domestic product will shrink 2.2 percent, compared with a 0.2 percent contraction predicted earlier.
Sberbank shares fell as much as 12 percent to 13.50 rubles, the lowest since Jan. 24, 2005. VTB Group, the second-biggest bank, sank 4.6 percent to a record low of $10.5 in London.
Weak Ruble
The ruble weakened for a third day against the dollar, depreciating as much as 0.6 percent to 36.5584 per dollar, the weakest since January 1998. A weaker ruble makes its more expensive for companies to pay back foreign-currency loans.
The MSCI EM East Europe Finance Index, a regional gauge of 13 lenders, dropped 6 percent, sinking 28 percent in three days. Moody’s Investors Service said yesterday foreign banks with subsidiaries in eastern Europe may face rating downgrades as the region’s economies slow.
Lukoil, Russia’s second-biggest oil producer, fell 8.1 percent to 1,027 rubles. OAO Surgutneftegaz, the country’s fourth-biggest producer, dropped 8 percent to 16.274 rubles.
Crude in New York slipped 0.3 percent to $34.82 a barrel in after-hours trading, extending yesterday’s 6.9 percent decline.
Norilsk Nickel, the world’s biggest producer of refined nickel, tumbled 13 percent to 1,491 rubles. Nickel for three- month delivery sank 1.5 percent to $9,750 a metric ton in London, putting Norilsk’s profitability at risk.
“According to our estimates, Norilsk will be break-even at a 2009 average nickel price of $9,700 a ton,” UralSib metals analyst Dmitry Smolin wrote in an e-mail message.



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