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 slid 1 percent to 1,494.07 by the close in Moscow. Rostelecom, the state-controlled telecommunications operator, lost 4.2 percent to 110.80 rubles, the most since Aug. 30. OAO Magnitogorsk Iron & Steel decreased 2.4 percent to 7.867 rubles and OAO Novolipetsk Steel tumbled 1.9 percent to 53.21 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 stock recently bought from Konstantin Malofeev, Kalugin said. 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.”

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

China Woes

Most metals, including lead and nickel, fell as a Chinese manufacturing gauge declined for the first time in four months. The preliminary 50.4 reading for the November Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compared with a 50.8 median estimate from analysts surveyed by Bloomberg News.

NLMK’s global depositary receipts dropped 1.9 percent to $16.09 in London. Steelmaker OAO Severstal lost 1.3 percent to 304 rubles in Moscow and 1.1 percent to $9.30 in London.

OAO Mechel, Russia’s biggest coking coal producer, rose as much as 2 percent, closing up 0.4 percent at 71.80 rubles after Citigroup Inc. raised the stock to buy from sell, on expectations the company will obtain covenant waivers, according to today’s e-mailed note.

The RTS Index retreated 1.5 percent to 1,425.86. 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.

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