Markets Drop by 2% As Holidays Approach

Russian stocks fell by an average of more than 2 percent last week, underlining investors' weariness ahead of the Easter break.

The ruble-denominated MICEX Index declined 2.2 percent over the week, while the dollar-denominated RTS Index fell 2.1 percent on the week.

Angelika Henkel, an analyst with Alfa Bank, partly attributed the downturn to investor reaction to economic figures from Europe and the United States.

"The electricity sector has been faring badly ... causing their shares to nose-dive," Henkel said. "The market is also in the process of adjusting prices in the metals sector, which has been largely overvalued."

The week's main news was the conclusion of the acquisition Thursday by United Company RusAl, the world's largest aluminum producer, of a blocking stake in Norilsk Nickel held by Onexim Group, the investment vehicle of billionaire Mikhail Prokhorov.

The deal gave Oleg Deripaska's RusAl 25 percent plus one share in Norilsk, in exchange for 14 percent in RusAl and an unspecified cash sum.

The exact value of the deal was not disclosed. In a report, PricewaterhouseCoopers calculated that that the deal was worth $15.7 billion.

Michael Knoll, director and head of M&A lead advisory at PricewaterhouseCoopers, said such M&A deals were made "possible by a positive market environment and huge international interest, high internal liquidity, a strong ruble and macroeconomic stability."

"M&A activity made up 14 percent of GDP and had a significant influence on the continuing economic growth of Russia," Knoll said Thursday, presenting a report on M&A activity over the last year. Consolidation continued to sweep through most sectors as companies sought economies of scale and the necessary heft to compete in an increasingly sophisticated market, Knoll said.

The market and analysts gave a mixed reaction to the RusAl-Onexim deal, with concerns mainly being expressed for minority shareholders.

Norilsk rose 74.58 rubles, or 1.1 percent, to 6,651.97 rubles on Friday, after falling 3.1 percent Thursday following RusAl's announcement of the purchase.

"The sale is bad news for minority shareholders who associate Deripaska with a tough and demanding management style," said Marina Irkly, an analyst with Veles Capital.

"Minority stakeholders in Norilsk fear their interests will be ignored in favor of the big shareholders' when the new owner takes over."

Tom Mundy, an equity analyst with Renaissance Capital, said Norilsk's stock problems last week were part of an ongoing story that has seen the company's stock appreciating and falling in a zigzag fashion.

"The argument from a lot of investors is that with RusAl acquiring a blocking stake, minority shareholders appear to be at a greater risk," Mundy said.