Updated August 11, 2008

Situation in the Georgian and Ossetian conflict zone has continued and worsened during the weekend, and the Russian stock market participants have given up hopes for recovery in the nearest future.

In conditions, when all Russia's news push all Russian indices down, and all leading western markets grow, analysts do not give forecasts even for the short-term prospect.

In terms of news about the continued Georgian and Ossetian conflict, Russia's stock market drop started on Friday, August, 8, with the trading session opening and ended in the collapse of the MICEX (Moscow Interbank Currency Exchange) index – by 5,25%, and RTS (Russian Trading System) index – by 6,51%. Rosneft stocks have gone by 7,81% down, and only 1,2% separates them from falling below the placement price. Other securities of the public offering issuers have long ago crossed this borderline.

On August, 8 VTB Bank lost 6,08% (below IPO level by 44,41%), the Savings Bank – 6,64% (below SPO level by 33,86%).

"The current situation cannot be compared even to the Yukos times.

Everything is more serious now& quot;, is sure KIT Finance director for operations at capital market Sergey Zharov. "Then, in 2004, negative events were related to only one company, and now several factors are combined". "The situation worsens day by day: first was the conflict with TNK-BP, then Mechel, and now fighting on Caucasus", marks head of Renaissance online department for broker operations Denis Philippov.

"Investors try to reduce risks and minimize losses".

From the May maximum levels the Russian indices have already fallen by more than 30%. "The Russian market has not witnessed such scale correction for years", marks Renaissance Capital top-strategist for equity market Ovanes Oganisyan. In experts' opinion, if it was not the long fall within last weeks, the situation would not be so dramatic now.

"Indices lost only 5-6% as the floors met this negative point when the market had been already resold", as supposes Alliance Continental Managing Company head of active operations management Denis Novikov.

"If such news appeared in May, then the one-day fall could exceed 15%".

Current drop at the Russian market occurs on the background of the West growth. On August, 8 the core European indices added 0,2-08%, and the American ones grew by 2,4-2,7%. After the Russian floors closed, a drop relay continued depositary receipts representing securities of Russia's issuers circulating on the New York Stock Exchange.

They lost 0,98-8,7%. "Now Russia's market ignores events on foreign floors, and the situation is determined by intrarussian news", is sure Den is Novikov.

Analysts do not give any forecasts concerning further Russian market dynamics.

"Due to the current volatility, the market can go both down and up", as Troika Dialog portfolio manager Vladimir Potapov supposes.

However, he marks, it is senseless for long-term investors to sell cheap securities at the current levels and fix losses.

In Ovanes Oganisyan's opinion, in the nearest future investors will look for any positive reason to signal purchases start.

"At any moment the market can bounce, but one should not expect slow consolidation of the current levels", supposes Mr. Oganisyan. "The best position for the nearest future is absence of any positions and to watch the market from the outside", experts from AntantaPioglobal Investment Gro up sum up.