MOSCOW, Feb 5 (Reuters) - Russian stocks reversed early losses on Tuesday,

boosted by strong demand for dividend-payers and stronger oil prices, after

political concerns in Europe prompted investors to lock in profits following a

rally to 10-month highs in January.

The dollar-denominated RTS index was flat at 1,612.6 points at 1358

GMT. Its rouble-denominated MICEX share index was up 0.2 percent at

1,538.2 points.

'Dividend stories are in demand, despite market volatility, especially

within specific funds focused on stocks. Bonds still preserve their status of a

safe asset, so many investors do not see any reasons to switch them,' said

Andrey Kukk, senior trader at Uralsib Capital.

An increased inflow of cash into equity funds in January fuelled talk of a

long-awaited 'great rotation' out of fixed income and into stocks.

Kukk cited a broad range of stocks with attractive dividend valuations, such

as telecom operator MTS, which rose 0.6 percent, fourth-largest crude

producer Surgutneftegaz, up 0.2 percent, and mid-sized oil producer

Tatneft, up 0.5 percent.

Russia's steel and mining stocks outperformed the broader market

after a positive PMI data from China added to signs that the world's

second-largest economy is poised for a modest recovery.

Bond yields edged up on Tuesday, as the data showed inflation

jumped above 7 percent in January. The yield on 5-year OFZ

treasury bonds inched up to 6.21 percent from 6.18 percent on Monday.

The rouble firmed 0.1 percent against the dollar to 30.05, ,

as oil prices bounced towards $117 per barrel of Brent. The Russian

currency rose by 0.1 percent versus the euro to 40.61 and was 0.1

percent firmer against the euro-dollar basket at 34.80.

Russian Markets Latest Net % % Change

Change Change on year

STOCKS

MICEX 1538.23 2.88 0.19 9.70

RTS 1612.59 0.07 0.00 16.70

London ADRs 926.34 1.27 0.14 4.85

Emrg Mkt Indx 1066.93 -5.80 -0.54 1.11

MSCI Russia 852.69 -0.13 -0.02 5.59

Sberbank 107.64 0.44 0.41 15.82

VTB 0.06 0.00 0.07 2.86

Gazprom 141.35 -0.12 -0.08 -1.64

LUKOIL 2013.00 5.80 0.29 0.64

Rostelecom 121.45 -0.51 -0.42 0.87

Dollar/Rouble 30.05 -0.04 -0.14 -1.19

Euro/Rouble 40.61 -0.03 -0.08 0.87

Rouble basket 34.80 -0.04 -0.11 -0.12

DEBT Bid Ask %Rtn Coupon

Russia 10-yr 6.64 6.60 -0.13 7.60

bond

MONEY MARKET Bid Ask Close

Overnight rate 5.52 5.57 5.58

All data taken from Reuters at 1358 GMT

(Additional reporting by Zlata Garasyuta; Writing by Maya Dyakina; editing by

Ron Askew)

Keywords: RUSSIA MARKETS/

(maya.dyakina@thomsonreuters.com)(+7-495-775-12-42)

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