USD 64.3455

+0.09

EUR 71.0503

+0.2

BRENT 59.72

+59.72

AI-92 42.27

+0.11

AI-95 46.03

+0.1

AI-98 51.83

+0.01

Diesel 46.13

-0.02

21

RUSSIAN MARKET NEWS UPDATE FEBRUARY 18th

Record Highs Reached in Most Areas of Russian Market

The rally in equities continued on Tuesday, with nearly $500 million worth of shares changing hands in domestic exchanges. Gazprom locals were carried up over the symbolic Rb 50 mark ($1.79) ? an all time high, with LUKoil (+0.8% to $26.78) also at its historic high. Global commodity price optimism pushed up all the other resource stocks, notably Norilsk Nickel (+1.2%) which is shrugging off the effect of the recent profit warning and returning to its traditional role as a pure metal price flux. But the market?s strength extended well beyond natural resources. Sberbank (+1.7%) continues its steady but sure progress, helped now by renewed bond market strength as indicators show inflationary pressures in the US remaining weak. All other winners were put into the shade, however, by the wireless telecoms. Less surprising than the recovery of Vimpelcom (8%) on the easing of official harassment was the further ?sympathy? rally of MTS +6.9%.

With the benchmark RTS Index settling at an all time high above 650, it's worth recalling that the two previous liquidity-driven rallies last year were only finally stopped in their tracks by political shocks over Yukos. This picture ? very much including the potential hazard from the Yukos-Khodorkovsky affair ? is the same today.

Russian external debt was flat yesterday in the absence of important news against a background of quiet global markets. The EMBI+ Russia Index added 0.1% with its spread flat at 248 bp. Domestic debt was firmer on the back of the strong rouble and ample liquidity, despite the fact that Rb 19 bn worth of new domestic bonds are to be placed this week.

Meanwhile, International Moscow Bank ? Russia's 10th-largest bank with assets of $2.8 bn ? yesterday placed Rb 1 bn worth of its three-year bond at a yield of 8.47%.