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Russia Stocks Fall Before Greece Meeting; Telecoms Drop

Nov. 26 (Bloomberg) -- Russian stocks tumbled the most in two weeks as crude oil fell and telecom shares retreated before OAO MegaFon’s initial public offering.

The Micex Index dropped 0.7 percent to 1,403.94 by the close in Moscow after adding 2.1 percent last week. The gauge climbed as much as 0.3 percent earlier. Utilities and telecom stocks fell the most among industry groups, losing at least 1.2 percent on average. OAO Mobile TeleSystems declined 1 percent, while OAO Rostelecom dropped 1.2 percent.

Euro-area finance ministers are meeting in Brussels for a third time this month to try to release an aid payment to Greece. Crude, Russia’s main export earner, declined 0.8 percent to $87.58, the first drop in three days. Russia receives about half of its budget revenue from oil and natural gas sales. MegaFon, Russia’s second-largest mobile-phone operator, finishes taking orders for its share sale on Nov. 27.

“There’s still uncertainty in the air, and any sort of delay in European aid to Greece affects investor sentiment toward Russia,” Slava Smolyaninov, head of research at UralSib Capital in Moscow, said by phone.

The dollar-denominated RTS Index fell 0.4 percent to 1,426.96.

Crude oil dropped as Israel relaxed restrictions on Palestinians in the Gaza Strip after last week’s cease-fire with Hamas survived claims of breaches by both sides.

Rusal, Norilsk

OAO Surgutneftegas, an oil producer, declined 1.7 percent to 25.869 rubles. Standard & Poor’s GSCI Commodities Index retreated 0.4 percent to 647.28.

The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 1.5 percent to $28.04 on Nov. 23, pushing its weekly gain to 4 percent. The RTS Volatility Index, which measures swings in the index futures, dropped 1.6 percent to 22.39.

United Co. Rusal, the Russian aluminum producer that holds a 25 percent stake in OAO GMK Norilsk Nickel, jumped 1.7 percent to 184.07 rubles, the highest level in almost two months, on bets Roman Abramovich’s possible acquisition of a stake in Norilsk will boost dividends. Norilsk dropped 0.7 percent to 4,649 rubles.

MegaFon has received orders for all the shares of its initial public offering, said people with knowledge of the matter. Orders came in at the lower half of the initial price range of $20 to $25, the people said, adding that more are expected to be confirmed as U.S. investors return from Thanksgiving holidays today.

Trading of the shares will begin Nov. 28 in London and Moscow. At the midpoint, the MegaFon IPO was set to raise at least $1.7 billion, according to a MegaFon statement on Nov. 15.

The Micex trades at 5.2 times estimated earnings, the lowest valuation among 21 emerging markets tracked by Bloomberg. That compares with a multiple of 10 times for the MSCI Emerging Markets Index. Russia’s benchmark gauge has advanced 0.1 percent this year, compared with an 8.6 percent gain for the global index for developing markets.

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

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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