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Russia Stocks Climb to Week-High as NLMK Lifts Metal Producers

Russian equities rebounded, gaining for a third day as OAO Novolipetsk Steel led a rally among metal producers.

The Micex Index added 1.2 percent to 1,422.99 by the close in Moscow, the highest since May 10. The volume of shares traded on the Micex was 4.8 percent below the gauge’s 30-day average, while the index’s 10-day price swings fell to 17.615.

Basic materials companies led gains among European equities, climbing 1.3 percent. OAO Mechel, Russia’s biggest coking coal producer, surged 2.7 percent to 118.80 rubles after falling 1.1 percent yesterday. Novolipetsk, also known as NLMK, increased 4.3 percent to 48.40 rubles, the biggest advancer on the Micex, while its global depositary receipts added 4.3 percent to $15.51.

The mining industry “has been the underperforming sector, so Russian stocks are starting to respond to gains recorded elsewhere,” Julian Rimmer, an equities trader at CF Global Trading in London, said by e-mail. “Positioning in this sector is very defensive so occasionally there will be trend reversals.”

OAO Severstal rose 3.2 percent to 274.10 rubles after losing 1 percent yesterday, while GDRs climbed 2.6 percent to $8.745. OAO GMK Norilsk Nickel advanced 2.1 percent to 4,707 rubles after dropping 1.2 percent yesterday.

Crude, Russia’s main export earner, declined 1.1 percent to $95.63 a barrel in New York. Russia’s equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg.

VTB, Gazprom

VTB Group, Russia’s second-biggest lender, rose 3.1 percent to 4.80 kopeks. The lender’s GDRs increased 2.8 percent to $3.063. The bank’s $3.3 billion share sale will strengthen its capital base as Basel III rules are introduced in Russia, VTB Group Chief Executive Officer Andrey Kostin said at a conference in London.

OAO Gazprom, Russia’s biggest company and natural gas export monopoly, rose 0.1 percent to 126.48 rubles. Its GDRs dropped 0.1 percent to $8.045. Gazprom’s board of directors is looking at ways to boost transparency, according to an e-mailed statement today. One of the steps discussed is to include the company’s shares in the Moscow Exchange’s so-called A1 list of stocks that Russian pension funds and insurance companies can buy, the company said.

Gazprom’s board of directors decided today to pay 5.99 rubles a share in 2012 dividends, confirming a recommendation by the company’s management. That compares with 8.97 rubles a share it paid in 2011.

Rostelecom Earnings

Russia may increase dividends paid by state-controlled companies to 35 percent of profit as it seeks to boost budget revenue, three government officials with knowledge of the matter said May 8. Ten-day price swings on Gazprom tumbled to 29.841 today from 30.509.

OAO Rostelecom, the nation’s state-run phone company, retreated after profit fell, losing 0.6 percent to 113.24 rubles. Rostelecom posted a 49 percent drop in net income in the first quarter from a year earlier, the company said in a statement today.

“Overall, we see the results as rather weak,” Ksenia Arutyunova, an analyst at Rye, MAN & Gor Securities, who rates the stock buy, said in an e-mailed note. “We expect Rostelecom to show improvement in coming quarters.”

The Micex trades at 5.3 times its 12-month estimated earnings and has lost 3.5 percent this year, compared with a 10.6 multiple for the MSCI Emerging Markets Index, which has dropped 0.9 percent in the period.

The dollar-denominated RTS Index jumped 1.1 percent to 1,433.02. The RTS Volatility Index, which measures expected swings in stock futures, decreased 0.6 percent to 20.33 today. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. added 0.4 percent today.

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