Russian Stocks Advance to 13-Month High as Lukoil, Uralkali Gain

Russian stocks advanced to a 13-month high, led by OAO Lukoil and OAO Uralkali, as investors bet valuations have fallen too low amid signs the ruble is stabilizing.

The benchmark Micex Index rose 0.8 percent to 1,530.4 at the close of trading in Moscow as 32 shares on the gauge climbed and 18 slid. The dollar-denominated RTS Index rose 1.9 percent for a fourth day of gains, its longest winning streak this month. The RTS has rebounded 4 percent from a five-year low reached last week.

Lukoil, Russia’s second-biggest oil producer, added 2.3 percent to the highest price since July 2008, after BCS Financial Group advised investors to buy the stock. Uralkali rose 3.7 percent. The country’s largest potash producer rebounded today from a 28 percent slump in the previous two days after Kommersant reported that water flow to its Solikamsk-2 mine has slowed.

“Uralkali has been oversold as if investors have already priced in the loss of the flooded mine, while there’s still a chance operations will resume,” Sabina Mukhamedzhanova, a money manager at Promsvyaz Asset Management in Moscow, said by phone. “The ruble’s declines have stabilized and the market is still cheap. So perhaps foreign investors are picking up shares.”

The ruble rallied 1.3 percent to 46.2470 versus the dollar, rising for a fourth day and paring its drop this year 29 percent. The Micex and the RTS trade at 5.1 times the projected earnings of their members, below their five-year averages of 6.5 and 5.6 times respectively.

Index Weighting

Uralkali’s weighting in the MSCI Russia 10/40 Index was increased 125 basis points to 4.5 percent after the stock’s declines, which could trigger inflows of as much as $53 million, VTB Capital analyst Ilya Piterskiy said in an e-mailed note today.

Uralkali jumped 6.4 percent in London after sinking 23 percent to a five-year low yesterday. The production disruption pushed Morgan Stanley and UBS AG to cut Uralkali to the equivalent of neutral.

“Uralkali’s shares are rebounding after a serious two-day drop, but it’s still too early to say that they’ve hit the bottom,” Artem Argetkin, head of sales at BCS Financial Group, said by e-mail.

The weighting of the American Depositary Receipts of OAO Mobile TeleSystems was increased 96 basis points to 3.96 percent due to AFK Sistema’s stock drop. MTS and Sistema have a combined 4.5 percent weighting in the MSCI, Piterskiy said. VTB Capital sees as much as $40 million of inflows into MTS ADRs as a result. MTS gained 1.3 percent today.

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