Lull in storm for Russia's battered Exchange

Russia's stock market recovered some ground yesterday after assurances from the country's president that other business leaders would not be targeted by the Kremlin, following the arrest of Russia's richest man.

The benchmark RTS share index closed up but there was not a convincing rebound as investors continued to worry about the wider fall-out from the arrest, a week ago, of the chief executive of Yukos, Mikhail Khodorkovsky.

The credit rating agency Moody's, which awarded Russia investment grade status at the beginning of last month, provided some comfort with the news that it would maintain this rating. "Moody's views the current events associated with the Russian oil company, Yukos, as being an isolated incident rather than a harbinger of fundamental change in the broad pro-market direction of the economic development of the country and the economic policies of the government," the agency said.

There was a gain of 1.9 per cent on the RTS index. But the improvement came on low volumes, with one trader commenting "there's no broad buying behind the bounce".

The stabilisation in shares trading followed a meeting between the President, Vladimir Putin, and investment banks on Thursday, hours after Russian prosecutors froze a controlling block of shares in Yukos, belonging to Mr Khodorkovsky, who is charged with fraud and tax evasion. Prosecutors unfroze a small part of that shareholding yesterday.

Bill Browder, of Hermitage Capital Management, a leading Russian investment house, said the stock sellers this week tended to be Russian, while foreign investors were using the opportunity to buy shares.

The RTS index dropped 8 per cent on Thursday and it is down 21 per cent since 20 October. Investors are concerned that if Mr Khodorkovsky and Yukos can be targeted, so might others. However, Mr Khodorkovsky alone broke a "deal" that Russian's super-rich oligarchs made with President Putin to stay out of politics.

Mr Browder said: "The hysteria has died down a bit. Everyone is desperately afraid of renationalisation but this is really only about the conflict between one guy and the Kremlin. When everyone realises that, the market will recover. People will go back to focusing on the great economic fundamentals."

Russia's economy has benefited in particular from the high oil prices that have been sustained for the whole of this year. Shares in Yukos also regained some of Thursday's 14 per cent drop in value yesterday to close at $11.20, up 4.7 per cent, despite a Standard & Poor's warning that it was considering downgrading its credit rating on the company.