Emerging markets continue to experience the flow of liquidity … Last week, the inflow of funds investing in emerging markets reached $ 4 billion, is the best result since December 2007 and four times the average weekly figure for this year. Funds GEM, where the share of Russian market is about 7%, attracted USD 2.2 billion, against USD 1.2 billion the previous week, showed EPFR Global.

… Russia - among the major winners. For funds investing in emerging markets in Europe, this week became the best since May 2008. Influx of funds amounted to USD 334 million (compared with USD 139 million the prior week). Most of this money was sent to Russia's assets - the inflow of funds investing in Russia amounted to USD 187 million compared with USD 71 million the prior week. An influx of funds into Russia's ETF for the week increased by 7.5% to USD 127 million Finally, according to the National League of Governors, the inflow of funds into Russia's stock mutual funds amounted to one week to October 9, 210 million rubles. (USD 7 million) after the reduction over the previous three weeks.

The influx of money could be another catalyst for Russia's stock market, whose growth was already 125% since the beginning of the year. According to our estimates, continued inflow of funds at the same rate may outweigh any negative news or a decline in oil prices, and we recommend that you use the likely points of correction to buy stocks.

The market of oil and macroeconomic background looks good for Russia. Oil prices struck a resistance level at around USD 75/brr. But Russia's economy is showing signs of recovery: the rate of decline in manufacturing output fell to its lowest level in 10 months (the September decline of 9.5% in annual comparison against 12.6% in August). Last index values PMI (the service sector and manufacturing sector) exceeded the mark of 50 points separating the fall of the growth. Ruble remains stable (in the market have been fixed, some requests for the purchase price is below 29 rubles /USD), and reserves of Russia have increased by USD 42 billion to reach its lowest level since mid-March (USD 376 billion).

Publication Russia's companies reporting for the III quarter of 2009, may also give impetus to the stock market. We expect that most companies, especially big oil and gas, steel, telecommunications holding companies and banks, will demonstrate improved performance compared with the previous quarter due to higher raw materials prices, increased load capacities, to improve the situation with the debt burden, strengthening of the ruble, and increasing consumer demand.

Among blue chips, we prefer the securities of companies lagged behind the market in recent years, as well as with specific catalysts for growth. These companies, in particular, Gazprom, Uralkali, Surgutneftegaz, IMC and MMC Norilsk Nickel. Among the companies' second-tier the most attractive, in our opinion, are IDC Holding , Sistema, Raspadskaya, Dragon Oil, Gazprom Neft and Akron.

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