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Russia's profitable summer break

Eastern European equity had a summer of love, as stockmarkets from Budapest to Istanbul hit all-time highs. Russia, last year's chronic underachiever, has been the best performer of all.

SUMMER IS TRADITIONALLY a quiet period for Moscow traders. They say goodbye to the smoggy capital and head for their dachas, leaving behind their positions in cash to avoid any nasty August surprises, such as the one in 1998 that wiped 55% off the RTS, the Moscow equity index.

This year, though, intrepid traders who decided to sweat it out in the capital rather than cool off in their rural retreats have been well rewarded. The RTS, having fallen to 630 in May, started to rise in June. In August, it smashed through an all-time high of 730 and headed for 800, leaving analysts scrambling to revalue their year-end targets. It is now at 814, having risen 30% in just over two months.

Roland Nash, chief strategist at Renaissance Capital, says: "This is the largest sustained revaluation since the end of 2003."

Compare this with last year, when the Russian stockmarket was basically flat, in stark contrast to outperforming markets in such countries as Ukraine and Hungary. What has changed?

The generalized global appeal of emerging markets is an important reason. Glen Finegan, senior analyst at First State Investments, which manages about $4.5

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