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Russia Stocks Rally on Uralkali Stake Sale, JPMorgan Upgrade

Russian stocks rose for a third day after billionaire Mikhail Prokhorov agreed to buy a stake in OAO Uralkali and as JPMorgan Chase & Co. recommended buying the nation’s equities.

The Micex Index climbed 1.1 percent to 1,510.61 in Moscow, taking its three-day rally to 3 percent. Uralkali jumped 2.3 percent to 179.20 rubles, the highest since Oct. 21. OAO Mechel, the nation’s biggest coking-coal producer, extended a rebound after agreeing to restructure debt, climbing 5.8 percent to 74.60 rubles. The stock plunged 41 percent on Nov. 13, the most on record.

JPMorgan lifted Russian shares to overweight, the equivalent of buy, citing expectations global growth will stabilize commodity prices, according to an e-mailed note today. Prokhorov’s Onexim Group agreed to buy Suleiman Kerimov’s 21.75 percent stake in potash producer Uralkali, while Mechel reached an agreement with a majority of its lenders.

Uralkali rose “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 company’s ordinary shares are the third-worst performer on the benchmark gauge this year, down 64 percent.

China Reform

JPMorgan said it favors OAO Gazprom on its prospective gas deal with China, higher dividends and capital-expenditure discipline. The New York-based bank has a “strong call” on OAO Sberbank given the lender’s new five-year strategy and on OAO Lukoil because of its dividend yield.

Gazprom increased 1.6 percent to 149.45 rubles, while Sberbank added 1.7 percent to 105.45 rubles.

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.

The RTS Index increased 1.3 percent to 1,462.98. Russian 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 10.8 for the MSCI Emerging Markets Index.

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