Russia Stocks Fall 2nd Day as Rostelecom Sinks on Dilution Bets

Russian stocks dropped for a second day as OAO Rostelecom fell on concern a share sale may dilute investors’ stakes and signals U.S. stimulus may be reduced pared appetite for riskier emerging-market assets.

The Micex Index (INDEXCF) slid 0.5 percent to 1,501.01 by 11:19 a.m. in Moscow. Rostelecom, Russia’s state-controlled telecommunications operator, lost 3.1 percent to 112.06 rubles. OAO TMK, the world’s largest maker of pipes for the oil and gas industry by volume, retreated 1.6 percent to 90.61 rubles.

Rostelecom will sell treasury shares next year, Chief Executive Officer Sergey Kalugin told reporters in Moscow yesterday. The sale may take place in a secondary public offering and will include shares recently bought from Konstantin Malofeev, Kalugin said. Crude oil, the nation’s chief export earner, dropped after minutes of the Federal Reserve’s last meeting, released yesterday, signaled asset purchases may be reduced as the economy improves.

“Rostelecom investors are reacting negatively to the potential dilution of their capital,” Alexander Kostyukov, an analyst at Veles Capital, said by phone from Moscow. “The Fed’s stimulus tapering would cut liquidity, reducing appetite for emerging markets.”

Fed policy makers expected economic data to signal ongoing improvement in the labor market and “thus warrant trimming the pace of purchases in coming months,” according to minutes of the Federal Open Market Committee’s Oct. 29-30 meeting released yesterday.

Uralkali Extradition

Crude oil dropped 0.2 percent to $93.65 in New York, the second day of declines. Russia receives about half of its budget revenue from natural gas and oil sales.

OAO Uralkali rose as much as 1.1 percent, trading up 0.5 percent at 169.71 rubles. The world’s biggest potash producer gained as Russian prosecutors said Chief Executive Officer Vladislav Baumgertner will be extradited to Russia from Belarus “soon,” according to an e-mailed statement.

The RTS Index (RTSI$) retreated 1.1 percent to 1,431.74. The country’s equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the Micex trading at 4.3 times projected 12-month earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.

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

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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