People walk in the Red Square, with St. Basil's Cathedral (L), the Kremlin's Spasskaya (Saviour) Tower inside a scaffolding and the mausoleum of Soviet state founder Vladimir Lenin (C, front) seen in the background, as it snows in central Moscow January 13, 2015.MAXIM SHEMETOV/Reuters
The largest exchange-traded fund tracking Russian stocks is opening the year with the highest redemptions in a month amid the widest price swings since 2009 as oil prices extend their rout and the ruble plummets.
Shares in the $1.4-billion Market Vectors Russia ETF slipped for a third day in New York, dropping 2.3 per cent to $14.43 at 2:19 p.m. in New York. Asset managers pulled $36.9-million from the fund on Monday, the biggest outflow since mid-December, data compiled by Bloomberg show. The Bloomberg Russia - US Equity Index of the most-traded Russian stocks fell 1.8 per cent after the dollar-denominated RTS Index declined to the lowest in four weeks. The ruble tumbled 4.3 per cent against the dollar.
Brent crude, the oil grade traders use to price the country's main export blend, traded below West Texas Intermediate crude for the first time in 1 1/2 years amid a weak European economy. The world's biggest energy producer is facing the first recession since 2009 as sanctions linked to the Ukraine conflict stoke the worst currency crisis in 16 years. The fund's 30-day volatility held near 82, the highest level since March 2009, as Russian markets that had either been closed or trading with light volumes in the past two weeks reopened.
"Investors' nerves are failing as oil drops below $60 and they've decided to exit Russian equities until global commodity markets stabilize," Oleg Popov, a money manager at Allianz Investments in Moscow, said by e-mail. "It looks like someone had a good long rest and is now back in the game."
Russia's $2-trillion economy will shrink as much as 4.7 per cent in 2015, according to central bank estimates for a stress scenario based on oil prices averaging $60 a barrel. The ruble tumbled to 65.91, widening its loss this year to almost 8 per cent, the most among 31 major currencies, as plunging oil prices exacerbate the impact of international sanctions linked to the Ukraine crisis. President Vladimir Putin denies involvement in the conflict in the former Soviet republic.
"With falling oil prices and a plunging ruble, those few investors who still want to deal with Russia are leaving, only to come back when the prices fall even more," Sergey Pigarev, an analyst at Rye, Man & Gor Securities in Moscow, said by phone. "These are speculative investors, they are not interested in staying in Russia long-term."
With assistance from Ksenia Galouchko in Moscow.