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Rostelecom Tumbles as MSCI Inc. Cuts Country Index Weighting

May 31 (Bloomberg) -- OAO Rostelecom, Russia’s dominant fixed-line operator, sank the most in nine months as MSCI Inc. cut the stock’s weighting in its Russia Index.

American depositary receipts of the Moscow-based telecommunications company lost 11 percent, the most since Aug. 8, to $19.14 at the close of trading in New York. Shares in Moscow dropped 5.7 percent to 106.33 rubles, or the equivalent of $3.19. One ADR equals six ordinary shares.

MSCI reduced its weighting in Rostelecom by 0.3 percent to 2.3 percent, according to an e-mailed copy of MSCI’s report on May 15.

“A lot of funds use the MSCI as an index for Russia, so as they’re changing their exposure, the stock is feeling the impact,” John T. Connor, founder and portfolio manager of the Third Millennium Russia Fund, which manages $20 million including shares of Rostelecom, said by phone from New Jersey. “This is really a buying opportunity as nothing has actually changed at Rostelecom.”

Rostelecom, Connor said, is focusing on additional services such as video and social media. The company said on May 24 that it will increase its ownership of Mosteleset, which operates data and pay television networks in Moscow, to 100 percent after buying a 26 percent stake for 1.8 billion rubles ($53.8 million).

The MSCI Russia Index fell 1.8 percent to 665.88 for a 9.6 percent slide this year.

To contact the reporter on this story: Leon Lazaroff in New York llazaroff@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at Tbarak@bloomberg.net

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