Updated September 23, 2008

   The rapid quotations growth that took place during the trades in the Russian stocks on Friday, September 19, didn't have any continuation on Monday, September, 22 – according to the results of the trading session, the indices added 0,6-1%. The trades' volume has exceeded hardly the Friday indices, when the stock exchanges have been trading within half of the day.

The market participants expect the entry of the budgetary facilities to the market, as well as the recovery of the affected companies and banks' solvency.

   Before the trading session of September, 22 started, the Federal Financial Markets Service (FFMS) had informed the participants that they could finalize the margin lending agreements reached before the trades had stopped on September, 17, and sell their securities.

"The lifting of the FFMS's ban on the margin trade resulted in the burst of activity at the beginning of trades and the quotations surge", the head of Olma IF's sales department Dmitry Lobanov marked.

At MICEX (Moscow Interbank Currency Exchange), 30% of the turnover fell mostly to the first hour of trades.

   On September, 22, the overall trades volume of MICEX (RUR 30,4 billion) had equaled almost the Friday volume (RUR 31 billion), but the brokers were trading during half of the session due to the interruptions, so, the volume fell almost by half.

The analogical situation was during the trades in the Russian securities at the LSE

(London Stock Exchange). If on Friday, September, 19, the trades' volume totaled $3,1 billion (the sum of the agreements reached with Gazprom attained $1,2 billion), on Monday, September, 22, the trades' volume didn't exceed $1,5 billion.

    The continuing oil prices growth (on September, 22, Brent crude's quotations exceeded $100 per barrel, and WTI's quotations reached $108 per barrel) didn't lead to the active purchases of

the investors. According to the results of the day, the MICEX index added only 0,62%, and settled at the mark of 1105,73 points,

and the RTS index grew by 1,05%, and settled at 1309,5 points. Europe's trades closed with the indices' drop by 1,4-2,3%, and in the USA, the markets opened with the drop of the top indices by 1,6% (19.00 Moscow time).

   Along with such low trades' volume and the growth of the key Russia's indices, the speculative trade in some securities caused such quotations' fluctuations, that the trades in them were suspended. MICEX suspended the trades (due to the rapid quotations' growth) in the stocks of Volzhskaya TGC, MREGC (Moscow Region Electric Grid Company), Irkutskenergo, Yakutskenergo, TGC-1, OGC-2, and STC (South Telecommunication Company). The volatility that grew lately led to the major discrepancies in

the quot ations of the same securities traded

at MICEX and the LSE. "After on Friday, September, 19, the trades in VTB Bank's stocks had been closed at the internal market due to the major surge in price, the demand that was pushing the quotations up, moved to the LSE, where the price of the bank's depositary receipts grew by 40%", the vice president of SI Capital Dmitry Sadovy explains.

In order to terminate the difference, on September, 22, VTB's quotations were moving towards each other, and as a result, they grew by 15% at MICEX, and the bank's depositary receipts lost 13% at the LSE.

   Such major quotations' fluctuations attract speculators, but frighten the investors off.

Lately, the maximum daily prices' fluctuations of "the blue chips" exceed rarely 8-10%, the head of Kapital MC' s analytical department Sergey Karykhalin explained.

However, the events of the previous week showed that quotations can fluctuate within 10% during a day.

   According to the experts, the majority of the former active trades' participants, such as Troika Dialog and Renaissance Capital, have cut their activity at the stock exchange for some time. The rumors about a sale or withdrawal from a purchase of one or another investment company or bank go around the market.

The senior investment manager of Gazprombank Asset Management Andrey Zokin considers that investors are waiting for the entry of the budgetary facilities to the market.

The facilities are very important for the majority of the players to operate at the stock market.

"Previous week, we had won the discount back that was being formed due to the liquidity shortage at the market. Now, everyone expects, when the wish comes true", Mr. Zokin marks.

Updated September 23, 2008

JSC TransContainer' s IPO planned for 2008-end should have become the acid-test ratio of the investors' interest in the subsidiaries of Russia's Russian Railways JSC (RZD). However, the dire condition of the stock market has made the company to put off the placement to 2011.

The IPO of another RZD's subsidiary – RefService – is put off as well.

The experts are puzzled concerning the duration of the pause, since, in their opinion, the market will recover earlier.

So, at the moment, RZD has to look for other ways of facilities attraction.

On September, 22, RZD CEO Vladimir Yakunin reported that the company had put off the stocks placement of its affiliates – JSC TransContainer and JSC RefService (specializes in transporting freights in insulated rolling stocks) – to 2011. According to him, the decision is a reaction to the situation at Russia and world's stock market. “We are not targeted at selling these stock holdings for any price, and we are ready to postpone the transactions for the later term”, the senior Vice President of RZD Feodor Andreev added.

He marked also that the decision on the sale would be taken on the basis of the situation at the Russian and international financial markets.

In TransContainer marked that they didn' t receive ye

t any official documents concerning this issue. Deputy CEO of RefService company Oleg Bogomolov reported that he wasn't aware of the new decision of RZD's management. “RZD directors' board has ratified the sale of 25% plus one stock of RefService within the open auction that will take place at 2008-end.

All documents are prepared already, and at the moment, we are waiting for Russia's government authorization to hold this auction. Moreover, according to our data, as soon as we receive it, the auction will be held”, Mr. Bogomolov explained. In RZD refused to comment further.

TransContainer JSC should have become the first RZD' s affiliate to

separate. Three stages of placing company's stocks were announced: the private placement, the IPO on MICEX (Moscow Interbank Currency Exchange) and RTS (Russian Trading System) and the sale of additional issue of stocks and RZD's stock holding (it should have reached 51% by this moment). The private placement has been held already: at the beginning of this year, about 15% of TransContainer stocks were sold to the EBRD (European Bank for Reconstruction and Development ), Moore Capital Management, LLC, GLG Emerging Markets Fund and Troika Dialog Investments Limited.

Thus, Mr. Andreev said earlier that in 2009, TransContainer intended to place 14-19% of stocks at the London Stock Exchange (LSE). At the end of the previous year, the deputy head of the Ministry of Economic Development and Trade (MEDT) Kirill Androsov said that RefService would hold its IPO in 2008.

The experts were not surprised at Mr. Yakunin's decision, and specified that there wasn't any sense to hold IPOs considering the dire market situation, however, the suspension period was too long. So, Mikhail Sayno from BrokerCreditService supposes that the placement could have been postponed to the mid of 2010.

According to his opinion, by this term, the market will recover fully.

Ivan Zavadsky from Kapital Investment Company agrees that it is the reinsurance date.

“RZD will have to find another way of receiving money, and probably, it may be one or several private placements”, the expert says.

The head of InfraNews agency Aleksey Bezborodov adds that, probably, Mr. Yakunin has outlined the new direction of the company's policy concerning assets sale.

“I think that RZD both has suspended the IPOs and will put off other sales of its subsidiaries. It is hard to sell them under the good market situation to say nothing of the current condition”, the expert says.

Updated September 22, 2008

   The foreign investor s

come back to Russia's stock market. Within the last week, September, 11-17, the facilities inflow to the investment funds exceeded $76 million. The measures on the stabilization of

the situation at the financial market undertaken by the state encouraged this process. However, the market participants consider that the facilities belong to the stock speculators mainly, and they can be funneled out of Russia at any moment.

   According to the data of Emerging Portfolio Fund Research, within September, 11-17, the capital inflow to the funds investing in Russia and the CIS countries reached $76,5 million. This index has exceeded 1,4 times the facilities volume funneled out within the preceding week ($55 million). The three-month period of the continuous facilities funneling out of Russia's equity market by the nonresidents has finished.

"We have observed finally the confident purchases made by the nonresidents", Uralsib Company's Vice President Ilya Lobanov marks.

"The major part of them was fixed, when the trades on the Russian floors had been suspended". According to the head of Metropol Financial Company's department for operations at the stock market Alexander Zakharov, the foreign hedge funds started to buy within the first week of September, and last week, such purchases had the systematic character. At the same time, according to the calculations of the Bank of Russia's first deputy chairman Aleksey Ulyukaev, the September index of the overall capital outflow from Russia will equal or will be higher than the August index of $4,6 billion.

   Russia's private investors took interest in the Russian market as well.

In Kapital MC fixed the capital inflow exceeding significantly the level of the previous days. The Company's chief executive Vadim Soskov marked that "the announcement about the state backing of the market restored the investors' confidence". The head of UFG Asset Management's department for pooled investments Igor Ryabov confirms the growing interest in the mutual funds, however, he marks that "it doesn't go about some kind of excitement concerning the mutual funds".

    The facilities inflow to Russia's market was taking place on the background of the nonresidents' withdrawal from other BRIC countries (Brazil, Russia, India, and China) . Within the period of September, 11-17, $117 million was funneled out of India, $185 million – out of Brazil, and $175 million – out of China. "Within the overall period of the crisis, the funds funneled much more facilities out of Russia as compared to other regions, and as a result, Russia's market suffered the most, and therefore it is the most attractive now", Ilya Lobanov explains.

   The return of the investors to

the Russian market was taking place on the background of the overall situation worsening. The oil prices drop lower $90 per barrel, Lehman Brothers bankruptcy, the takeovers of Merrill Lynch and Morgan Stanley, as well as weak macroeconomic information coming from the USA have frightened the investors worldwide.

The major failures to execute repo agreements because of the liquidity shortage aggravated the problems of Russia's stock market. Due to the panic sales that took place during the first two days of the previous week, the top Russian indices lost 16-23%.

   "It seems trivial, but, when Russia's investors were selling their assets in a state of panic, the foreign investors, understanding that Russia had the technical collapse, were buying them", Sputnik MC' director on investments Vladimir Malkhanov said.

"When it came out that Russia's authorities allocate the facilities to back the liquidity, the foreign buyers became more interested in the market". On Wednesday and Thursday, September, 17 and 18, the volume of trades at the LSE (London Stock Exchange) and the NYSE (New York Stock Exchange) totaled $3-3,5, thus it exceeded the indices of the previous four weeks 1,5-1,7 times.

The state-owned securities (VTB Bank, Rosneft, Gazprom) were in high demand.

On Thursday, September, 18, when the Russian floors were closed until the Federal Financial Markets Service (FFMS) issued the special report, the depositary receipts of the majority of the Russian companies traded in London grew by 4-23%. On Friday, September 19, the trades at

the Russian stock exchanges, as well as the purchases, resumed.

The rapid quotations growth has resulted in the double suspension of trades. According to the daily results, the RTS (Russian Trading System) index added 22,4%, and settled at the mark of 1295,91 points. The MICEX (Moscow Interbank Currency Exchange) index grew by 28,7%, and settled at the mark of 1098,95 points.

Thus, the repo operations continued until 22.00 Moscow time at the MICEX. The trades volume of the western exchanges exceeded $3,2 billion.

   Despite the measures on the stabilization of the market situation undertaken by Russia's government, analysts consider that in the nearest month, the investors will continue to funnel their facilities out of Russia. "Despite several days of growth, it is not eliminated that foreign investors will wish to fix the profit", Alexander Zakharov marks.

Russia's private investors "were also buying the shares for the short-term prospect", Mr. Soskov supposes.

   The determining factor for the market is still the world economic situation and the financial system, as well as the situation development at the internal financial market. The advisor to president on the economic issues Arkady Dvorkovich declared already that by the year-end, the budget allocates RUR 250 billion to purchase the stocks. The analogical sum will be invested next year if required.

According to Russia's Finance Minister Aleksey Kudrin, the facilities will be directed to buy back the stocks of VTB Bank, Gazprom and Rosneft.

"The government interventions in the stock market will result in the quotations growth in the nearest future", Vladimir Malkhanov considers. "However, in the long-term prospect, they can result in the cut of the foreign investors' interest in the Russian market, since the control of the state means extra risks for them".

Updated September 19, 2008

The urgent measures undertaken by Russia's state regulators on the liquidity growth

of the Russian equity market participants provided the rapid recovery

of the quotations that had been falling lately.

The liquidity problems of the market participants were being overcome by means of decisive actions undertaken by the Bank of Russia and the Ministry of Finance.

Moreover, the verbal interventions of Russia's political authorities backed psychologically the vertical recovery of Russia' s market that demon strated even the 20-30-percent growth of the stock indices.

The actions of Russia's financial authorities were reminding the analogical actions undertaken by

the Central Banks of the other world countries, both emerging and already developed. All markets require the liquidity, and they are provided mainly with it.

As a result, at the beginning of the trade session, the American market was rising by 3-3,6%. Both Asian and West European stock floors demonstrated the major growth.

The world oil prices show the broad fluctuations, however, under the conditions, when the rate of the single European currency has reached the resistance level of about $1,44, the price of the "black gold" will recover probably to the psychologically important level of $100 per barrel.

All this factors mean that in the nearest future, Russia's market continues to rebound, since its growth has been stopped shifty and

it may recover.

The announcement about the forecast falling of Russia's sovereign rating made by S&P agency didn't influence on the securities quotations, the analysts of Veles Capital Company consider. The market growth was reminding mainly the technical correction after the severe fall, therefore, in future, it is possible to expect the high volatility of the quotations.

According to the assessments of Alor Company's analysts, on Monday, September, 22, the positive external background will be observed and it will lead to the continuing quotations growth of Russia's stocks. Nevertheless, both the local uncertainty and the risk of the correction remain.

Moreover, S&P has taken to account already the actions of Russia's government on the fight against liquidity crisis and has revised the forecast on the rating towards lowering from "positive" to "stable", and that may result in the new outflow of the non-residents' capital from Russia's stock market.

Updated September 17, 2008

   The problem s of the American financial organizations resulted in the direst collapse at Russia's stock market. The indices of RTS (Russian Trading System) and MICEX (Moscow Interbank Currency Exchange) lost 11,47% and 17,45% respectively, and equaled the levels of 2005-end.

The stock exchanges were forced to stop the trades.

The experts warn that the worst is ahead, since in the nearest future, the collapse of the market will lead to the serious problems with the lending of the Russian companies, and some of them can go bankrupt.

   The range of negative news from the USA led to the correction at all world floors on September, 16.

After Lehman Brothers Bank had gone bankrupt, the largest US insurance company, AIG, declared about the analogical financial problems.

As a result, the European indices lost 1,63-3,43%, the Asian – 4,9-5,4% (the day before, the American indices fell by 3,6-4,42%). The market participants expected that within the meeting, the Federal Reserve System of the USA (FRS) would reduce the discount rate, however it was remained unchanged – 2%.

    Neither of the western floors faced such collapse, as the Russian stock market. The situation aggravated, when the oil prices fell (at 20.30 Moscow time, the futures on Brent oil fell by 4,37%, to $90,12). On September, 16, the collapse of Russia's market started at the very opening, and due to the sharp quotations' drop, the stock exchanges had to suspend the trade in some stocks (Rostelecom, the Savings Bank, TGC-7 etc.) for an hour or even till Thursday, September, 18, and they will resume their work after the Federal Financial Markets Service (FFMS) issues the corresponding permit. At 16.42 Moscow time, the drop of the MICEX index was 16,6%, and the stock exchange stopped its activity for one hour.

   The stock exchange didn't take such decision since June, 13, 2006. At 17.00, RTS stopped the trades as well.

"Then, the core trade in the Russian securities took place in London", the director for investments of Gazprombank Asset Management MC Andrey Zokin says.

At 17.42, MICEX resumed the trades for three minutes. The players took advantage of it to continue the trades. According to the results of the day, the MICEX index lost 17,45%, and settled at the level of 881,17 points. The stock exchange didn't record such values of the index since November, 2005. "The market doesn't have the bottom because of the shortage of the buyers", the head of the group for stocks management of Renaissance Investments Management Anton Rakhmanov states.

   According to the trades' results of September, 16, the capitalization of Russia's equity market, calculated on the basis of the securities traded at RTS, fell by 10,95% and attained $682,594 billion. Since the beginning of the year, the capitalization fell by 48,63%.

   On September, 16, the stocks of VTB Bank at MICEX fell by 29,26% and cost 76% lower than the price of the placement. The securities of the Savings Bank lost 21,72% (59,55% lower than the placement), Rosneft – 21,27% (34% lower than the price of the placement). Gazprom's capitalization fell by $31,96 billion.

   "The current prices can't be explained at all", the asset manager of Alfa Bank Andrey Kilin states. "The majority of the companies are traded lower than their own capital, and capitalization of some of them is even lower than the amount of facilities on the bank accounts". The experts mark that the key ground of such severe collapse is the full closing of the repo market on September, 16. "The investors, who were taking securities on the lending resources, were asked to return the money", Anton Rakhmanov explains.

"The players had to close their positions, because there is no money".

   "We will have much leisure time soon, since the emergence of the Russian "Lehman Brothers" is inevitable", some traders surveyed said.

The majority of the clients don't even call their managers, and nobody knows, when the collapse stops. "The only thing we can do now is to hedge the portfolio by means of the derivative instruments", Anton Rakhmanov supposes. "However, the risks remain even in this case".

   The experts agree that in the nearest future, the collapse of Russia's market will result in the chain reaction and its consequences will emerge in all sectors of the economy. "There is the total absence of limits at the market: neither investment banks, nor brokers trust each other", the senior analysts for investment strategy of VTB Capital Ivan Ivanchenko marks. The companies that were taking loans on their securities could face the troubles now.

"If loans have been taken on security of stocks, they will move to the new owners at the drop of the security price", Andrey Kilin is convinced.

He marks that as a result, the majority of the companies will change the owners, and some of them will go bankrupt.

"Obviously, in the nearest future, the limits for small companies will be closed, and they will neither have any opportunity to take loans, nor to hold repo, and they will have to cut their positions", the director for investments of Gazprombank Asset Management MC Andrey Zokin forecasts. "The companies will not have new projects, and the old ones will be refunded or sold at the low prices", Ivan Ivanchenko supposes. According to his opinion, this process affects the companies of the real estate market foremost.

"The companies will cut their expenditures and this will lead to the dismissals of employees", the expert forecasts.

   In Andrey Zokin's opinion, the most pessimistic scenario has little probability, but if it is implemented, the companies facing the problems with the attraction of the capital will be in the technical default, they will not be able to settle the payments, and will go bankrupt, as well as their contractors.

   "More and more companies will try to improve their market condition by means of the stocks buyback", Andrey Kilin marks.

Norilsk Nickel MMC, Novatek, Severstal and Wimm-Bill-Dann have already declared about the buybacks of their stocks; and due to this step, the stocks of these companies looked better than the market on September, 16.

   The state can support the market as well.

On September, 16, Prime Minister Vladimir Putin reported that the Russian Finance Ministry and the Central Bank allocated RUR 475 billion to support the liquidity at the Russian market, and marked that Russia would "easily pass through" the dire phenomena of the world economy. Moreover, the first Vice Premier Igor Shuvalov headed the emergency meeting in the State Duma devoted to the stabilization of Russia' s financial market.

Updated September 15, 2008

   Strikeforce Mining and Resources Ltd. (SMR) (owns mining assets of Basic Element Company and belongs to the top billionaire Oleg Deripaska) can become the first Russian company that will hold IPO at the Hong Kong Stock Exchange. Early in October, SMR will present the oncom

ing IPO in Hong Kong.

   The company plans to attract nearly $200 million, and to place 25% of stocks at the Hong Kong Stock Exchange (HKSE). Bank of China and Morgan Stanley act as managers of IPO.

   In the opinion of Veles Capital Company' s analy

st Stanislas Fomenko, nobody will invest in the new stocks at

the London Stock Exchange, where SMR could be placed.

The core reason is the financial cr

isis in the USA.

"Therefore, the company has decided to enter the Asian floors, where the investors will take probably more interest in the Russian player", the expert considers.

   Metropol Company's analyst Maxim Khudalov considers that at the moment, it is the terrible period for the placement. "The securities of almost all companies are undervalued", the expert is convinced.

"Obviously, Russia' s SMR faced the

shortage of money.

Probably, Basic Element's subsidiary didn't manage to take loans in the banks, therefore the only thing it had is to place stocks at a stock exchange".

   According to the analyst, as a rule, the mining companies are holding their IPOs at the European floors, since investors take major interest in them there.

"Obviously, the HKSE has easier procedure of registration, therefore SMR has entered the Asian floor to accelerate the process of money receipt", Maxim Khudalov supposes. "However, on the background of the negative situation at the stock market, and in the light of the foreign policy statements of the US authorities over Russia, I fear that the company will not manage to attract the required sum".

Updated September 11, 2008

   On Thursday, September, 11, Deutsche Bank and UFG Asset Management (UFG AM) declared that they have inked the agreement on the strategic partnership and business cooperation in Russia. According to the terms of the agreement, Deutsche Bank, through its asset management division, will buy 40% in UFG Invest,

Russia's managing company owned by UFG AM, with the opportunity to increase its stake to 100% in the future.

   The already established division engaged in asset management in Russia, DWS Investments (Russia), will be incorporated with UFG Invest. The joint company will be named Deutsche UFG Capital Management.

Both parties have agreed not to disclose the financial terms of the agreement.

   The deal will be finalized by the end of 2008.

In addition, the parties have agreed that Deutsche Bank will buy the minority stockholding of UFG Advisors Ltd. engaged in managing hedge funds and providing services to the institutional investors and individuals on investing in the Russian securities.

   As of June, 30, 2008, UFG Invest enters the top ten of the largest players of this sector with the volume of the managed assets exceeding €400 million. The range of the services provided covers mutual funds, trust management for private and corporate customers.

   "Deutsche Bank has expanded on time its activity in Russia, becom

ing one of the market leaders that,

in our opinion, will develop dynamically in the future.

The purchase of the investment and bank division of UFG in 2004 was the weighted and sound step, and this agreement will strengthen our positions in Russia", the head of Deutsche Bank' s regional divi sions in Russia Igor Lozhevsky declared.

   "This agreement is the result of the thorough and detailed study

of the possibilities to strengthen our positions at the Russian market, one of the most dynamic markets worldwide. If we join our efforts, we will manage to consolidate the structure and the opportunities at the international markets", the head of DWS Europe Stephan Kunze added.

   "UFG Asset Management's team has proved already that it is a high-skilled, professional and successful staff.

I think that UFG Asset Management's huge achievement is that we have managed not only to occupy the leading positions at Russia's market, but we will manage to bring the company to the international level with such serious partner as Deutsche Bank", the senior managing partner of UFG Asset Management Group Boris Fedorov marked.

Expert comments

Florian Fenner, the managing partner and the head of UFG Asset Management's investment committee

   Due to the mutually beneficial strategic partnership, the company will offer its clients the wider range of investment products, the opportunity to use the maximally diversified investment strategies.

The deal confirms our confidence both in the prospects of Russia's financial market, and in the opportunity to increase considerably our market stake in the nearest three years.

Updated September 9, 2008

   Russia's National Wealth Fund (NWF) enters the corporate securities market.

About 80% of its facilities will be invested in stocks and bonds of the foreign companies mainly, but the Russian organizations

will get the stake as well.

   In 2009, the NWF will be split off from the Central Bank of Russia, and about 50% of the Fund's facilities will be invested in stocks, and up to 30% – in the corporate bonds of the foreign issuers, as Deputy Finance Minister Dmitry Pankin said. However, 5% more of the Fund's facilities will be allocated to the direct investments. In addition, it would be reasonable to include derivatives.

   This is the new investment strategy of the National Wealth Fund, and the Ministry of Finance will introduce it to Russia's government on October, 1. According to Mr.

Pankin, the major part of the facilities will be invested for 10 to 15 years.

   The government's official explained that the Fund's facilities could be invested in stocks and bonds of the highly rated companies of the countries in the Central and Eastern Europe, as well as BRIC countries (Brazil, Russia, India, China). This financial strategy can be implemented, if the strategy of the budgetary earnings, VAT amount in particular, remains unchanged, he adds.

Otherwise, it will be possible to compensate the shortage of the income via the Fund in 5 or 7 years.

   The capital outflow from Russia due to the war conflict in Georgia and the oil prices drop encourages the decision-making on the investing of the NWF in favor of the internal market, as the economist of Merrill Lynch Julia Tseplyaeva considers. "We will be surprised, what size of the stake will be [the authorized Fund's facilities at Russia's market]". The capital outflow from Russia is taking place because of the political reasons rather than economic ones, since the economy is stable, and it means that political measures exactly should be taken – the government's support of the market foremost, as the president of the private pension fund "RESO Savings Fund" Andrey Neverov is convinced.

RTS (Russian Trading System) requires only $4 billion for its stabilization, and the main thing here is that the government will prove that it

is ready to provide the financial support, as the strategist of Alfa Bank Erik Depoi is convinced.

In 1997, China's National Fund backed the Hong Kong Stock Exchange because its index fell by 10,4%, as Mr. Depoi reminds.

   Russia's Ministry of Finance plans that the Fund will back the pension system: it will allocate annually the target transfer of 0,6% of GDP.

   In its financial strategy to 2023, the Ministry of Finance suggests to cut the volume of the reserve fund from 10% to 6% of GDP in order the NWF will get more.

According to the Finance Ministry's calculations, by the end of this year, it totals $100 billion against $32 billion in August.

   The new investment strategy is very aggressive, as the chairman of MDM Bank' s board Oleg Vyugin con

siders. However, it is only a sample version for the long-term investments: similar recommendations on the strategy of pension savings are worked out already in the USA for people, who are left 30 years before retirement.

   The risky management strategy of the Fund's facilities can be implemented within the 15-year period, as the government's official explained, and named Norway's sovereign fund that invests in Russia' s market a s well. The emerging markets are more volatile, but the Fund can wait until they recover and benefit from the growing quotations.

   The Fund's portfolio will not comprise "bad securities", since the criteria for the pension money are very strict in Russia, as Mrs.

Tseplyaeva is convinced. For instance, the private pension funds may keep up to 40% of stocks and to 40% of corporate bonds in the portfolio of pension savings (the facilities of the compulsory pension insurance), and up to 70% of stocks and to 70% of corporate bonds in the portfolio of pension reserves (the facilities of the voluntary pension insurance), and these are the highly rated securities, as Mr.

Neverov says. The private pension funds don't invest abroad, since they are forbidden to invest in the index funds and bonds of the EBRD (European Bank for Reconstruction and Development).

   The managing director of Bright Minds Capital Denis Rodionov fears that high inflation will influence on the revenues of the National Welfare Fund, and the corruption – on the placement, since the money can be directed to support some companies.

Investments in the western markets are amore safe, as Mr. Rodionov is convinced.

Updated September 8, 2009

Russia' s

stocks are very cheap now after the Friday sale, September, 5, as a result of which the indices lost 8-9%. However, there are no buyers.

On Friday, September, 5, Russia's stock market capitulated.

"We opened the market with the drop of 2%, then it fell to 9%, and then grew to – 4%", as the top-trader of Troika Dialog Timur Nasardinov says. By 15.00 Moscow time, the RTS index updated the minimum since the end of June, 2006, and fell to 1407 points, but it grew to 1469 points (-3,8%) at the closing.

The total capitalization of Russia's public companies went by 3% down, to $1,086 trln.

There was many stop losses and margin calls, because the market was falling by 4-5% within several days, as Mr. Nasardinov says. "We observed this several times since 1997". The managing partner of Da Vinci Capital Oleg Zhelezko is convinced that the depressed mood prevails not only in Russia, since the price for raw materials falls, the dollar goes up, the data on the unemployment in the USA is negative.

On Friday, September, 5, the European indices fell by 2,3-2,5%, the Asian – by 2,2-3,3%, MSCI Emerging Markets – by 2%, on Thursday, September, 4, the American indices fell by 3%, and on Friday, Dow Jones added 0,3%. One barrel of WTI oil went by 1,7% down, and settled at $106,2, and metals lost 2-5,4%. Both hedge funds and Russia's speculators leave the market, as Mr.

Zhelezko supposes.

In September, there was found a loophole for the facilities outflow from the hedge funds, and the investors use it actively, as the strategist of Renaissance Capital Ovanes Oganisyan says. The funds were accepting the applications within August, and they understand now, how much they have to sell, and it can take the whole month. According to the data of EPFR Global, the facilities outflow from the funds oriented to Russia continues for three months; and within the period of June, 25-September, 3, the net outflow reached $860 million.

On Friday, September, 5, the "blue chips" were falling by 6-13% at the MICEX, but then recovered. Norilsk Nickel was the outsider (-9,3%). VTB Bank's stocks fell by 6,9%, to RUR 5,96. The oil stocks, except for Surgutneftegaz (-5,9%), demonstrated good results: Lukoil lost 0,5%, and Rosneft added 0,5%.

The news that Russia's Ministry of Energy prepares the statements on the reduction of the tax burden, the MET in particular (Mineral Extraction Tax), backed the oil companies' quotations, as the portfolio manager of Pilgrim Asset Management Olga Izyumova marks.

Investors prefer the most liquid securities, but these buyers don't stake on the oversold Russia's market and play short, as Mr.

Nasardinov explains the difference.

The thing is that there are little sellers, and there are no buyers at all, as Mr. Zhelezko complains. "If there is no "fresh money", there will not be any growth, and neither western investors nor Russia's banks have money". On Friday, there was the fifth bottom this year, he says.

It is the second-largest correction for the last 10 years, as the strategist of Alfa Bank Erik Depoi calculated.

Since the May maximums, when the RTS index settled at almost 2500 points, it fell by 42%; and it fell by 47% within the correction of August, 29, 2000-January, 3, 2001.

When this process ends, the investors will get the unique opportunity of buying stocks at the bottom, if money is left.

The demand should appear at these levels, as Mr.

Nasardinov is convinced. "Banks, metallurgical and oil companies are very cheap now". On Friday, September, 5, VTB Bank's capitalization reached $15,2 billion at the LSE, only 0,8 (P/BV ratio) to the forecasted capital as of the year-end – $17,6 billion. As Mr. Zhelezko considers, people will buy, when several factors will be presented: the political risks should be settled, Russia's Central Bank should strengthen the ruble, good companies' indices for 3Q and the reports of the investment banks' analysts proving that now Russia's market is the cheapest in the world should be presented as well

Updated September 5, 2008

   Russia's managing companies will get a new tool permitting them

to get an additional income for the stockholders.

The Federal Financial Markets Service (FFMS) intends to permit the managers signing repo agreements using the assets of the investment funds. Since the beginning of the year, the mutual funds' losses reached 21% on average. So, according to the experts, the FFMS's innovation will help them to compensate these losses.

   The FFMS prepared the exposure draft "About risks' restriction related to the trust management of assets". This statement gives permission for the managing companies to reach repo agreements using the assets of the mutual funds.

"At the moment, such deals are forbidden by the law in force "About investment funds", and only these cases are the exception, when some companies require facilities to repay the shares", as the director of Otkritie FC's legal department Aleksey Bykov explains.

   According to the new document, the FFMS empowers the managers to use the securities, where the shareholders' facilities are invested in, as money resources on security.

Thus, according to the FFMS's project, several terms should be fulfilled.

So, any deal should be reached only through a stock exchange, the term of lending shouldn't exceed 30 days, and a managing company should give in pledge and get back the same amount of assets with the obligatory payment of the interest for using them.

Moreover, a regul ator sets a prohibition on the conclusion of a repo deal with a security the issuer of which has taken the decision about reorganization. Unlike the FFMS, the Central Bank that is lending actively the banks on the auctions of a daily repo, doesn't set such requirements for the deals concluded with the lending institutions.

   This innovation acts as an analogue of the interbank lending market for the managing companies, as the experts agree.

"The security-based operations with money resources on security will be in demand among the market participants, for instance, in case, when a market participant will require some securities to close a short position", as the managing director of KIT Fortis Investments Vladimir Tsuprov supposes.

   The managers would get the additional income for the shareholders due to this source of liquidity, he adds. "The brokers will take these securities by means of repo, then return them to the managers paying the interest for using them", as the portfolio manager Maxim Bekenev considers. According to the data of Investfunds.ru, last year, the shareholders of the open end mutual funds received 7,61% as the income, and from the beginning of the year to August, they lost 20,89%. "It is quite obvious that the repo operations can' t compensa te all losses. Even under the most optimistic version, a manager will give a half of his securities listed in a fund to a repo, because the securities of the large issuers are in demand at such deals, and the real revenue for using them will hardly exceed 4% per annum, and it means that they income of the whole fund will total 2%. "But, under the condition that the demand for the securities will be constant", as Maxim Bekenev says.

   Moreover, the experienced investors will take interest in repo deals: they will permit them establishing products with the wider range of tools. "However, the cost of variety and the profitability growth is a growth of risk: at the fulfillment of obligations, a company may not have enough facilities", as the director of Troika Dialog's management for portfolio investments Oleg Larichev marks.

The failure of Prolog Investment Agency to fulfill obligations on the range of repo deals as a result of which the company lost the license in 2003, can serve as an example of refusal of paying money for using the securities