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. Last Updated: 07/27/2016

Energy Companies Lead Stock Tumble

Russian stocks sank Wednesday, led by national electricity holding company Unified Energy Systems, natural gas producer Gazprom and oil producer LUKoil.

The ruble-based Micex Index lost 2.8 percent to 1569.87 after earlier falling as much as 5.3 percent. The dollar-denominated RTS Index dropped 2.1 percent to 1779.10.

Russian stocks fell alongside European and Asian markets. The declines came after a report late Tuesday showed sub-prime mortgage delinquencies in the United States climbed to a four-year high in the fourth quarter.

"It's a negative flavor coming from the United States with the mortgage market situation," said Erkin Nusurov, who helps manage $120 million in equities at Raiffeisen Capital Russia. "After the recent correction on the equity market worldwide, markets have been sensitive to any negative news."

UES fell 4.3 percent to 30.90 rubles, erasing part of the 12 percent gain in the previous three days.

Anatoly Chubais, head of the electrical utility, checked into a Moscow hospital Tuesday after struggling with influenza for more than two weeks.

Oil and gas companies, which make up about half of the RTS Index and one-third of the Micex Index, retreated after oil prices dropped earlier in New York.

Gazprom sank 2.6 percent to 253.40 rubles. Rosneft, Russia's second-largest oil producer, fell 3.9 percent to 205.5 rubles.

LUKoil fell 3 percent to 2,013.40 rubles. Alfa Bank cut its recommendation on the shares to "hold" from "buy," citing the heavy taxation and capital expenditure plaguing the oil industry.

"Investors should face the truth: The emerging capex explosion is not a one-off event, but the beginning of a new trend," Alfa analyst Dmitry Loukashov wrote in a report. "In the long term, Russia has no choice but to ease the oil taxation burden. However, this will take time."

In an interview Wednesday, emerging markets investor Jim Rogers said Russian equity markets were overvalued and could burst "sooner rather than later," revealing the skeletons in the cupboard of its "outlaw capitalism."

"I wouldn't put a nickel of my own money in Russia, and I wouldn't put a nickel of your money there either," Rogers, a long-time commodities bull, said by telephone from New York.

"Everything about Russia is one big bubble, and it's going to pop. It's going to happen sooner rather than later," said Rogers, who co-founded the Quantum Fund with George Soros in the 1970s and has focused on commodities since 1998.

"Russia is a disaster," Rogers said. "Everybody in Russia is busy stripping assets. If you ride across Russia, you are not going to see a lot of money being spent on railroads, pipelines or roads."

"It's outlaw capitalism."

Bloomberg, Reuters