Updated August 19, 2008

Troika Dialog is the first Russian investment bank having published the special review of the consequences of the Russian-Georgian conflict for the Russian Federation's markets. Troika Dialog analysts headed by Kingsmill Bond speak about the market that reminds the situation with Yukos's case, and they warn that if the negative scenarios develop, investors will forget about Russia, as they have forgotten about Argentina and Venezuela. They think that now the Russian stock market is the cheapest market in the world and consider that the stake of the foreign players at the stock market can become lower, than of the Russian ones, because of the capital outflow.

On August, 18 Troika Dialog analysts released the first review devoted to the markets' strategies in the post-war period under the outwardly optimistic title "The Myth about the New Cold War". Kingsmill Bond and Andrey Kuznetsov have briefly stated their views on the couple of the following months for the stock market investors.

Though they consider the conflict in South Ossetia as temporary and not affecting the core grounds for the market, the most essential forecast of the company is the statement: there will not be any stock market rally by 2009.

"We will be surprised, if any accelerator of the market's steady growth appears before the New Year", is marked in the review.

As consider in Troika Dialog, the war with Georgia and aggravation of relations with the USA and NATO don't imply direct macroeconomic threats for Russia, rather the capital outflow can result in Ukraine' s macroeconomic de

stabilization, as suppose in the company.

In Mr.

Bond's opinion, now the Russian market is "the cheapest among the world's largest markets": the market P/E ratio is estimated at 7,5, P/BV – at 1,7; and it is worse than at the height of the capital outflow from Russia's markets in 2003-2004 (8,5 and 1,4), though it is better as compared to the indices reached after the default in 1998-2002 (P/E – 7,0, P/BV – 1,3).

As consider in the company, it is not the market's bottom yet: recommendati on to buy

on the market will be made here when the situation will be assessed as dire.

According to Mr. Bond and Mr.

Kuznetsov's calculations, it can take place in November (elections in the USA) and in December (NATO's summit where will be obviously discussed Georgia's entry to the block, and Ukraine's as well). In addition, the market collapse can take place because of the oil prices' drop to $80 per barrel, however, it is impossible, as consider in Troika Dialog.

The sharp price rise for oil, the US attacks on Iran, approval of taxation reduction for the oil business in the Russian Federation and political agreements of Russia and NATO can become the triggers for the large-scale entry of investments to the market (it is better to remind that on Friday, August, 15, vice prime minister Aleksey Kudrin confirmed that the week of military actions in Georgia and South Ossetia resulted in the capital outflow from the Russian Federation of $7 billion). Moreover, Troika Dialog is more "pessimistic", than, for instance, Ekaterina Malofeeva from Renaissance Capital, as she preferred to speak about the war influence on president Dmitry Medvedev's status.

Thus, in Troika Dialog warn that if any negative factors interfere in the situation, "Russia can disappear from the investors' radars, like Argentina and Venezuela". The unusual situation on the stock market can lead to the immediate outflow: now the stake of the foreign portfolio investments here exceeds the stake of the Russian investments by 2%, as per Troika's calculations. In addition, the USA and Russia's discussions of geopolitical issues can result in the situation that will be determined by the Russian players only.