USD 66.263

-0.52

EUR 73.4989

-0.48

BRENT 60.25

-0.06

AI-92 42.26

+0.01

AI-95 46.04

+0.02

AI-98 51.73

-0.01

Diesel 45.96

+0.01

8

RUSSIAN MORNING MARKET NEWS DECEMBER 4th

The equity market was strong yesterday, closing up 2.5% as buyers returned....

The equity market was strong yesterday, closing up 2.5% as buyers returned. Volumes were also noticeably better than in recent weeks. After the recent turbulence, the market appears to have settled down around the 550 level as we approach the elections. Given the negative newsflow over the past few weeks, the market?s performance demonstrates considerable resilience.

Yukos underperformed, closing flat on the day, as did Sibneft (+1.7%) where there is still uncertainty regarding the merger, whether it happens and what it means for both companies. The Gazprom ADS was strong (+3.3%) while MTS had a recovery in the US.

Russian Eurobonds posted significant gains yesterday despite a fall in US Treasuries. The EMBI+ Russia Index added 0.8% with its spread tightening by 14 bp to 256. In our view, these gains were driven by the continuing tightening in Russian spreads towards their lows posted after the Moody's upgrade, now that investors are becoming less concerned about political events and their threat to Russia's solid creditworthiness. The continuing increase in the CBR reserves, together with the strength of the rouble, have also helped to reduce these concerns.

The GKO-OFZ market was mostly flat yesterday, for the most part due to the continuing supply of paper from the CBR. Corporate rouble bonds continued to increase on the back of the strong rouble and the improving liquidity.