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Russia Stocks Rally on Uralkali Stake Sale as Mechel Advances

Russian stocks headed for the longest streak of gains in three weeks after billionaire Mikhail Prokhorov agreed to buy a stake in OAO Uralkali. OAO Mechel (MTLR) extended its rebound after agreeing to restructure debt.

The Micex Index (INDEXCF) added 0.6 percent to 1,502.09 by 12:25 p.m. in Moscow, taking its three-day rally to 2.3 percent. Uralkali jumped 3.3 percent to 180.98 rubles, the highest since Sept. 20. Mechel, the nation’s biggest coking-coal producer, climbed 5.7 percent to 74.50 rubles, after dropping 41 percent on Nov. 13, the most on record.

Prokhorov’s Onexim Group agreed to buy Suleiman Kerimov’s 21.75 percent stake in potash producer Uralkali, according to a statement today. Mechel reversed a 30 percent drop last week after reaching an agreement with a majority of its lenders on debt restructuring.

“Uralkali is rising on the news that Prokhorov has bought a stake,” Slava Smolyaninov, a strategist at UralSib Capital in Moscow, said by phone. “Mechel is a very speculative stock at the moment; the fact they’ve come to an agreement with banks is good news.”

A Uralkali sale may defuse a dispute between Russia and Belarus sparked by the company’s July withdrawal from a trading venture that marketed 40 percent of export shipments in the $20 billion global industry for the soil nutrient.

Mechel, whose net debt was $9.55 billion as of June 1, has as much as $2.48 billion coming due next year, according to a June presentation on its website. The stock is the second-worst performer on the benchmark gauge this year, down 66 percent.

China Reform

Russian shares also gained after China vowed to carry out the broadest expansion of economic reforms since at least the 1990s, spurring emerging-market assets.

Chinese leaders pledged to allow more private investment in state-controlled industries and expand farmers’ land rights post the Communist Party plenum meeting.

“The market is positive about China’s reforms, because the proposed changed are meant to liberalize the economy, which is supportive for all emerging markets,” Smolyaninov said.

Crude oil, Russia’s main export earner, retreated 0.4 percent to $93.50 a barrel in New York. Russia receives about half of its budget revenue from oil and natural gas sales.

The RTS Index (RTSI$) increased 0.4 percent to 1,449.81. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.2 times projected 12-month earnings, compared with a multiple of 10.7 for the MSCI Emerging Markets Index.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net; Daliah Merzaban at dmerzaban@bloomberg.net

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