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. Last Updated: 07/27/2016

Russian Equities Surge Over 7% Following UBS Reports

Russian stocks gained the most among equity markets worldwide after UBS predicted a 30 percent surge for shares that have almost doubled this year.

Sberbank rallied 17 percent after UBS recommended the nation's biggest bank, saying it has become "more comfortable with risks in the financial industry." Rosneft and LUKoil advanced more than 6 percent as oil increased for a sixth day.

The 50-stock RTS Index added 7.3 percent to 1,167.42, the most in almost three months. The ruble-denominated MICEX Index jumped 7.4 percent to 1,206.2, closing above 1,200 for the first time since Sept. 8. The ruble strengthened as much as 1.3 percent to 30.58 per dollar, the highest since Jan. 9.

"Russia is still a relatively cheap market," Stephen Jennings, chief executive officer at Renaissance Group in Moscow, said Monday. "What we've seen is a return to normality."

Even after its rally this year, the RTS is valued at 6.8 times reported profit, less than half the price-to-earnings ratio of the other so-called BRIC countries, Brazil, India and China.

"The Russian market rally has been strong, and we feel it has not run out of steam," wrote UBS analysts, led by Dmitry Vinogradov, in Moscow in a report dated Monday. "Following the strong rally by exporters, we now recommend starting to rotate into domestic names, which should benefit from any economic upturn and strengthening currency."

Russia, the world's largest energy supplier, will probably be back on a sustainable growth path in the third quarter, possibly even in the second, UBS economist Clemens Grafe wrote in a separate report.

"The trough is behind us," Grafe wrote, adding that there are "green shoots" to be seen in a "mildly stronger" ruble and a slowing of inflation.