Russian Stocks Climb for Second Day; Rosneft Rises With Crude

By William Mauldin

Aug. 28 (Bloomberg) -- Russian stocks climbed the most in two weeks as investors bought into an equity market that has the cheapest valuations in two years.

OAO Rosneft, Russia's biggest oil producer, surged as crude oil prices rose for a fourth day. Bank Vozrozhdenie and AFI Development Plc gained after reporting earnings.

The ruble-denominated Micex Index climbed 2.6 percent to 1,337.02 at 4:05 p.m. in Moscow, its biggest gain since Aug. 11. The dollar-denominated RTS Index rose 2.4 percent to 1,626.65, a second day of gains.

``If you're brave now and buying Russia on a cheap valuation, then now is a good entry point,'' said Bernhard Maeder, portfolio manager at Credit Suisse Asset Management in Zurich. ``Some of the companies like the telecoms are quite defensive and have relatively stable earnings.''

OAO Mobile TeleSystems, Russia's biggest mobile telephone company, climbed 16.5 rubles, or 6.9 percent, to 255.90 rubles on the Micex Stock Exchange, its biggest advance in seven months. MTS said its board approved buying back 11.1 billion rubles ($452 million) of shares.

The RTS has retreated more than any other major stock market so far this quarter as Russia sent troops into Georgia, falling oil prices weighed on energy stocks and the government probed steel and coal producer OAO Mechel.

`Smart Money'

The events of July and August pushed the price-to-earnings ratio for the 50-stock RTS to 8.7, the lowest in two years, according to data compiled by Bloomberg.

``The smart money should be looking through the risk and when the dust settles buying at these attractive valuations,'' said Michael Kavanagh, head of research at UralSib Financial Corp. in Moscow. ``Certainly Russia looks oversold at the moment. One could suggest that the political risk has been priced in.''

Rosneft climbed 9.3 rubles, or 4.8 percent, to 202.21 rubles, its biggest gain since July 14. Crude for October delivery rose as much as $1.74, or 1.5 percent, to $119.89 a barrel in New York as meteorologists forecast Tropical Storm Gustav will be the most damaging since Hurricane Katrina.

AFI Development, the real estate developer of Israeli billionaire Lev Leviev, advanced 31 cents, or 6.2 percent, to $5.31 in London trading. The shares have lost 62 percent of their value since their initial public offering last year. The company said first-half profit almost doubled on increased demand for office buildings and retail space in Moscow.

Bank Vozrozhdenie

``Sentiment appears to be recovering ever so slightly, with growing number of investors thinking we may be in the midst of a bottoming process,'' Alfa Bank strategists Ron Smith and Erik DePoy wrote in a note to investors. Russian stocks will be driven by ``the rising oil prices and bargains galore.''

Bank Vozrozhdenie, a Russian mortgage lender, rose 55.45 rubles, or 6.4 percent, to 920 rubles, its first gain in four days. First-half profit more than doubled to 1.56 billion rubles ($63.5 million), the lenders said on its Web site today.

OAO AvtoVAZ, Russia's biggest carmaker, climbed 1.708 rubles, or 9.7 percent, to 19.30 rubles, the biggest gain in almost three months. AvtoVAZ and Nissan Motor. Co. may assemble cars at an airplane plant or shipyard in Russia's Far East, Vedomosti reported, citing unidentified officials from the two companies.

OAO Mosenergosbyt, the heat and power retailer supplying Moscow, climbed 0.027 ruble, or 11 percent, to 0.283 rubles, on track for its biggest gain in a week. Russia's antitrust regulator agreed to the sale of 50.9 percent of Mosenergosbyt to electricity trader OOO Transneftservice C, Interfax reported, citing an unidentified person in federal agency.

OAO Mosenergo, the utility that generates power and heat for Moscow, climbed 5.5 percent to 2.507 rubles.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.