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External factors behind the Russian stock market dynamics In December the Russian financial market dynamics, as a month earlier, was dependant on the situation in the world financial markets, characterized by periods of sharp decline due to the negative news, sometimes replaced by more optimistic investors behavior, urged by measures, taken by governments of a number of countries to support their financial systems. Among the adverse global market conditions, affecting the Russian market, one should mention:

- rumors in the market about the possible bankruptcy of General Motors Corp. and Chrysler LLC due to great losses from operations and the inability to make settlements with creditors;

- disclosure of negative macroeconomic information from the USA, in particular, the sustained low level for energy carriers demand in the US, growing unemployment and a significant reduction in the number of jobs and sales of new houses;

- information on the new losses of the Credit Suisse bank in November and planned further staff reduction (by 5.3 thousand employees);

- acquisition of 57.9 per cent shares in the largest bank Royal Bank of Scotland by the British government;

- bankruptcy of the major American media company Tribune Co;

- aggravating global liquidity market crisis;

- declining oil prices (in the second half of the month the price of oil has fallen down below USD 35 per bbl.);

- information on damages, incurred by the largest French bank BNP Paribas in the amount of EURO 701 million within 11 months of 2008;

- Chinese government authorities decision to pursue a policy of devaluation of the Chinese national currency;

- reduction of the net profit of the US American banks Goldman Sachs at 80 per cent, Morgan Stanley at 49 per cent within eleven months of 2008.

However, the following developments contributed to the growth of global financial markets:

- reduction of refinancing rate by the US FRS to 1 per cent per annum in late October, by European Central bank to 3.25 per cent in early November, by the Bank of England to 3 per cent (by 1,5 per cent) and by the Central Bank of Switzerland to 2 per cent contributed to the growth of global financial markets. Development of a new package of additional measures to support the US economy and the presentation of the stabilization plan for national economy by Italian Government also supported the global stock market.

- reduction of refinancing rate on December 4 by the EU Central Bank (to 2.5 per cent), by the Bank of England (to 2 per cent) and by the Central Bank of Switzerland (to 2 per cent), by the Central Bank of Switzerland on December 11 (to 2 per cent ) and by the Central Bank of South Korea (from 5.25 3 per cent);

- decision of the US government to allocate credit to American automotive companies (General Motors Corp. And Chrysler LLC) in the amount of USD 17.4 billion;

- decisions of the US FRS to reduce refinancing rate tp 0-0.25 per cent since December 16;

- information on the development of new anti-crisis plan for the support of the American infrastructure and national economic recovery ;

- Japan goernment decision to allocate USD 54 bln for the measure to suppress economic crisis.

All those factors provoked volatility in the major stock market indices. Thus, in December (as a month earlier), a significant downfall was noted in global indices, as compared with the indicators of the beginning of 2008 (by 20-70 per cent on average). An adverse trend was observed at the end of November 2008. For example, the indices of developing markets were growing by 1-12 per cent, while in the US and European markets some indices have decreased by 1-4 per cent (See Table 1 and Fig. 5).

Table Dynamics of international stock market indices (as of December 26, 2008) Dynamics Dynamics since Index Ticker Value within the the year month(%)10 beginning(%)MICEX (Russia) MICEXINDEXCF 608,55 -1,32 -67,RTS (Russia) RTSI 644,47 -4,40 -71,Dow Jones Industrial (USA) Average DJI (USA (USA) (USA) 8 515,55 -2,42 -35,NASDAQ Composite (USA) NASD 1 530,24 -0,12 -42,S&P 500 (USA) SPX 872,80 -1,68 -40,FTSE 100 (UK) FTSE 4 216,59 -0,23 -34,DAX-30 (Germany) DAX 4 629,38 -0,77 -42,CAC-40 (France) CAC 3 116,21 -4,13 -44,Swiss Market (Switzerland) SSMI 5 399,58 -4,28 -38,Nikkei-225 (Japan) NIKKEI 8 739,52 4,37 -42,Bovespa (Brasil) BUSP 36 864,13 1,80 -42,IPC (Mexico) IPC 22 515,34 11,45 -23,IPSA (Chile) IPSA 2 350,46 -3,38 -22,Straits Times (Singapore) STI 1 725,61 0,88 -50,Seoul Composite (South Korea) KS11 1 117,86 5,11 -41,ISE National-100 (Turky) XU100 26 498,96 4,39 -52,Morgan Stanley Emerging Markets Free EFM Index 446,25 4,10 -55,* Versus indices of October 26, Versus index indicator valid on September 27, 2006.

Versus index indicator valid on September 27, 2006.

130,0% 120,0% 110,0% 100,0% 90,0% 80,0% Dow Jones Industrial Average NASDAQ Composite 70,0% The MICEX Index The RTS Index 60,0% 50,0% 40,0% 30,0% 20,0% Fig. 5 Dynamics of the main USA and Russian stock indexes (in % to the date 01.10.2007) Corporate news VTB Bank In the framework of extended cooperation with the real economy sector enterprises, on December 4, the VTB-4 Bank has provided to OAO KAMAZ group a documentary credit limit in the amount of RUR 7 billion, credit to the automobile plant of SOLLERS group in the amount of RUR 4 billion for the term of one year, and credit lines to three businesses of Mechel group totaling to RUR billion for the term of one year to replenish the working capital of enterprises. On December 10, VNB Bank has provided credit to OAO Magnitogorsk Iron and Steel Works, amounting to RUR 4 billion for the term of one year to replenish the working capital. On December 19 VTB Bank has provided funding to AK ALROSA in the amount of RUR 44.2 billion for the term of 600 days, aimed at refinancing the current short-term debt on credits and loans, provided by the Russian and foreign investors. On December 24, VTB Bank has provided to OAO Siberian Coal Energy Company, coalextractive regional unit, funding in the volume of RUR 2.5 billion for a one-year term to finance the ongoing development activities and production facilities. Moreover, on December 25, OAO VTB has provided to NGO SATURN funding in the amount of RUR 7.5 billion, aimed at financial and economic activities, as well as payments on bonds and bills.

On December 3, VTB Bank has disclosed unconsolidated results in accordance with RAS for months in 2008: assets under RAS have increased by 64 per cent to RUR 2 473 billion. (decrease in November is 12 per cent); net profit of the Bank for December 1, 2008 amounted to RUR 12.2 billion.

(RUR 2.6 billion as of November 1, 2008), which is explained by the growth in interest and commission, as well as the positive effect of foreign currency exchange rate.

On December 9, VTB Bank has completed the transaction on acquisition 51 per cent share in OAO AF-Bank in Azerbaijan. In the near future a rebranding of the subsidiary bank and its renaming to OAO VNB (Azerbaijan). Also, on December 9, VTB Group has placed posted the bonds issue of OAO Rosselhosbank, 05 series in the total amount (total issue volume is RUR 10 billion).

Gasprom On December 13, OAO Gazprom was declared the winner of the tender for the development of hydrocarbons in Algeria (according to tentative estimates, recoverable oil reserves are estimated at nearly 30 million tons). OAO Gazprom is planning to invest about USD 120 million in exploration works on the project (seismic data investigation on 2500 sq. km and drilling of four prospect wells). December 23, the Board of Directors of OAO Gazprom has approved an investment program, the budget and plan optimization (reduction) of costs for 2009, providing activities, the total savings from which should amount to RUR 11.3 billion.

On December 24, OAO Gazprom and the Government of Serbia have signed the basic documents on cooperation in the energy sector: Framework agreement on cooperation in construction of Southern stream gas pipeline and transfer of natural gas through the territory of Serbia, as well as the Memorandum of Understanding on cooperation in the field of g storage in the framework of the project Banatsky Dvor.

Gasprom Neft On December 15, OAO Gasprom Neft has disclosed financial results under U.S. GAAP standards for the third quarter and nine months of 2008: net profit in the third quarter of 2008 amounted to USD 1 594 million (versus USD 957 million in 2007), profit before tax, interest and depreciation (EBITDA) made USD 2 642 million (USD 1,553 million in 2007); revenues amounted to USD 9,638 million (5,435 million dollars in the third quarter of 2007). Net profit for the nine months of 2008 amounted to USD 5,201(by 84.5 per cent higher than the 2007 indicator); EBITDA accounted to USD 7,million (73 per cent higher than the indicator of 2007); revenues reached USD 27,315 million (86 per cent higher than in 2007).

On December 15, OAO Gazprom Neft and Vnesheconombank (VTB) have signed an agreement to provide a credit line limit for USD 750 million (five tranches of USD 150 million) for the purpose of refinancing a partial repayment of principal of the syndicated credit in the amount of USD 2.billion, provided to the company by a group of foreign banks.

On December 24, OAO Gazprom Neft and the Government of Serbia have signed a contract for the sale of 51 per cent shares in NIS ( Oil Industry of Serbia).

LUKOIL On December 11, OAO LUKOIL has disclosed consolidated financial statements for the first nine months of 2008 under US GAAP standards: net profit amounted to USD 10,million(exceeding by 70.9 per cent the results of the nine months of 2007); EBITDA indicator has grown by 60.6 per cent and amounted to USD 16,652 million; sales increased to USD 89,265 million, the growth made 56.3 per cent).

osenergo On December 25, OAO Mosenergo has disclosed non-audited consolidated interim financial statements for the third quarter and nine months of 2008, developed in accordance with IFRS: sales for the first nine months of 2008 amounted to RUR 66,079 million (which is higher than the indicator of the same period of 2007 by RUR 12,915 million (by 24.29 per cent)); revenues for the third quarter of 2008 increased by RUR 5,678 million (46.03 per cent).

GMK Norilsk Nickel In view of the abolition of security measures, since December 12 OAO GMK Norilsk Nickel has resumed its activities to acquire its own placed shares.

1 2008 3- 9 2008 .: 9 2008 . 10,3 . ( 139,0 per cent 4,3 . 9 2007 .);

EBITDA 17,08 . ( 81,7 per cent 9 2007 .). 3- 2008 . EBITDA 5,3 . ( 31,4 per cent 4,1 . 3- 2007 .), 3,47 .

( 79,9 per cent 1,93 . 2007 .).

Rostelecom On December 8, OAO Rostelecom has disclosed the unaudited consolidated results for the first six months of 2008, developed under IFRS: the net profit has increased to RUR 9.8 billion (four-times growth as compared with the same period of 2007); OIBDA indicator (operating income before amortization, depreciation of fixed assets and losses (gains) on disposal of fixed assets) amounted to RUR 7.8 billion (14 per cent more than in 2007), profitability on OIBDA made 25 per cent.

On December 17, the international rating agency Standard & Poor's has upgraded the credit rating of OAO Rostelecom from BB- to BB with a stable forecast.

Sberbank of Russia On December 18 Sberbank of Russia has attracted a subordinated credit in the amount of RUR of $ 200 billion from the Bank of Russia in the framework of public strategy of the major banks recapitalization in the situation of financial instability.

On December 22, Sberbank of Russia has disclosed financial reporting for 11 months of 2008, developed under RAS: profit before taxes amounted to RUR 146.0 billion (against RUR 148.9 billion for 11 months of 2007), net profit made RUR 113.2 billion (versus RUR 118.4 billion in 2007).

atneft On December 22 OAO Tatneft has disclosed unaudited consolidated interim condensed financial reporting under to U.S. GAAP standards for the nine months of 2008: sales revenue amounted to USD 14 973 million (against 10,235 million for the relevant period of 2007); net profit made USD 1,million (USD 1,169 million dollars for the relevant period of 2007).

Corporate bonds market In December, the volume of the Russian domestic corporate bond market (at face value of the securities) was the highest since the beginning of 2008 and amounted to RUR 1,666.5 billion, what is by 0.6 per cent exceeds the indicator of November 2008. Within November 25 to December 24, 33.thousand transactions in corporate bonds were made at the MICEX Stock Exchange for the total amount of RUR 51.2 billion (as compared with 23.7 thousand transactions for RUR 38.1 bln within October 27 November 21).

After a continuous decline in the Russian market index of corporate bonds RUX-Cbonds since mid2008 there was a slight increase in December, from November 24 to December 24, nearly by 5 points (or 2.5 per cent). Herewith, the effective yield increased from 18.88 per cent to 20.20 within the period under review and the duration of the portfolio of corporate bonds has considerably decresed and made 587 days, what is 97 days less than as of the end of November(See Fig. 6).

24 Effective yield Index RUX-Cbonds 0 Fig. 6. The dynamics of the Russian corporate bonds market index and the weighted average yieldIn December the number, as well as the amount of corporate bond issues has decreased. From November 25 to December 24, there were only 5 issues of corporate bonds totaling to RUR 18.7 bln, whereas in the period from October 25 to November 24 there were 15 issues of corporate bonds for the amount of RUR 21.5 billion, and, for example, from August 25 to September 23 there were 42 issues for the volume of RUR 168.0 billion, including those bonds, issued by only one emitter. The bulk of Cbonds data.

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