Updated August 13, 2008

Official statement about cease-fire in the Georgia-Ossetia conflict zone caused 2,63-3,49% growth of the Russian stock indices. However, analysts don't speak about the steady market recovery that has fallen more than 30% within one and a half month. Currently, only speculators are operating on stock exchanges, and long-term investors reassess risks of the Russian securities.

On August, 12 RTS index (Russian Trading System) went 0,55% down, and MICEX index (Moscow Interbank Currency Exchange) lost 1,97% during trades' start. However, at about 13.00 Moscow time, information about Russia ceasing the military operation in Georgia appeared in the news line.

During the meeting with the defense minister Anatoly Serdyukov and the General Staff head Nikolay Makarov, Russia's president Dmitry Medvedev stated, "I've decided to stop the operation on forcing the Georgian authorities to the peace, the goal has been reached. The safety of our peacekeeping forces and civilian population has been regained".

After this statement was made, stock indices started going up.

Within the day, they grew by 3,8%. According to the trades' results, the MICEX index gained 2,63% and attained the 1449,34 point mark.

RTS index growth was major – 3,49%, to 1803,82 point. On August, 12 the majority of "blue chips" gained 1,2-11,3% on MICEX. Rostelecom securities lost 0,74%, but Norilsk Nickel stocks grew by 0,38%, and VTB Bank stocks gained 0,5%.

On August, 12 the market growth was a speculative game, the aim of which is to fix an income at those levels that reflect the current risks in real terms.

During the conflict beginning, the expectations concerning securities' quotations were quite negative, analysts say. "The latest events at the market – the situation with TNK-BP, Mechel Company, and the continuing financial crisis – have taught the investors to expect the worst", says VTB Capital top-analyst on investment strategy Ivan Ivanchenko.

"Therefore, when Georgia attacked South Ossetia, investors assumed that prices and events would forward the worst scenario". When investors were selling securities on Friday, August, 8 and on Monday morning, August, 11, it seems as they expected the conflict would last longer, and didn't take account of the fact that the situation would restore so quickly, the expert adds.

The market prices presupposed high risks that didn't realize, sums up Renaissance Capital analytical department head Roland Nash.

The minimum levels the Russian market could reach now, were crossed on Monday, August 11, supposes Roland Nash.

The situation at the market remains uncertain, and short-term investors mainly operate on

the floors at the moment. "There are no long-term players here, and only speculators carry out operations", states Alfa Bank trader Konstantin Shapsharov.

"And therefore, the market is so unstable and changes the dynamics sharply". Both Russian and foreign investors demonstrate speculative demand, he marks.

Long-term foreign players that didn't funnel their capitals out of Russia within the first days of the military campaign, had taken a wait and see attitude.

One should not expect large purchases from their part, until some certainty in the relations of Russia and the West appears, considers Konstantin Shapsharov. On August, 12 ADR of the Russian issuers showed different dynamics in New York: some securities grew by 0,11-3,07% at 21.00 Moscow time, the others lost 0,87-1,11%. "Despite the fact, the western mass media distort the actual events demonstrating Russia as an aggressor, investors take conscious decisions taking account of the Russian consultants' opinion", explains Ivan Ivanchenko. The Russian players can't give clear estimations as well.

Experts mark that despite the unwritten rule of the market – "one must buy stocks when tanks are thundering on the streets and blood is spilling", nobody can give an exact forecast for the nearest future. In Roland Nash opinion, if political risks continue to reduce, investors will assess the current terms as "a bottom", where one can enter the market.

"However, quick and stable recovery depends on many factors, including oil prices", Roland Nash is sure.

On August, 12 the price of Brent oil futures fell by 1,14%, to the mark of $111,38 per barrel, WTI – by 0,91%, to $113,41.