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. Last Updated: 07/27/2016

Rostelecom Soars 13% On Monopoly News

Russian shares closed up Friday on modest volumes due to a Western bank holiday and traders said local speculators drove up Rostelecom after an analyst's upgrade, risking profit-taking Monday.

The benchmark RTS index closed up 1.27 percent at 171.36 on volumes of $8.57 million. Reuters Russian Composite was up 1.03 percent at 1,431.19.

Rostelecom closed up 13.51 percent at $0.84 after state telecoms officials said the long-distance monopoly would be protected from competition for up to five more years while it entrenches itself in new markets and revives its core business.

Yevgeny Golosnoi, an analyst at Troika Dialog, raised his recommendation on Rostelecom to outperform from Neutral.

But Alfa Bank telecoms analyst Andrei Bogdanov said the rise might be short-lived because the promise to preserve the monopoly, which was issued at an investment conference Thursday, failed to ease the risks of a pending sector restructure.

"I can agree that the choices are few, and from the valuation perspective these shares are cheap, taking into account that there aren't many liquid shares on the market today and there is little news from issuers," Bogdanov said.

Bogdanov said that the share had lost 83 percent of its value since March 2000.

"But they aren't so cheap that they should be jumping up like this," he added.

A Western trader said that profit-taking was likely to kick in when Westerners returned to work after the Easter holiday.

"Given the move like this and given the company's shaky fundamentals, I would expect to see a little profit-taking by Westerners who haven't seen this move," the trader said.

"There was not enough volume to support a move of this magnitude," he added.

Gazprom locals lost momentum, and the share closed up only 0.86 percent to 11.90 rubles.

Alexei Bystrov of Olma brokerage said the prospect for liberalization of the two-tier share market to let foreigners buy local shares in the state-owned gas giant was "just the tip of the iceberg."

Bystrov said buyers sought the share last winter.

"People are accumulating the shares — maybe for themselves, maybe for Ruhrgas, maybe for the shareholders' meeting — but in any case, this is continued buying," he said.

Bystrov added that Gazprom's American Depositary Share had also gained.

The ADS closed up 6.79 percent at $7.475 on Thursday.

Traders said that the market was optimistic after the U.S. Nasdaq, a benchmark of risk appetite, showed signs of recovery.

However, locals were waiting to see how investors would react to a raft of U.S. company results expected this week.

"The Nasdaq has fallen a lot. It has a lot of potential to rise and so does Russia, in the fundamental sense," said Pavel Naumenko of Renaissance Capital.

"But it's too early to say that this will happen now," he added.