Ed Bentley

Oil-rich Abu Dhabi has stepped in to provide relief to emerging markets, pouring $10 billion into its debt-ridden fellow emirate Dubai, but Moscow's investors are warned not to bury their heads in the sand.

Stock markets around the world jumped Monday morning, led by Dubai's exchange which was up over 10 per cent, while Abu Dhabi's gained 7 per cent.

The effect on Russia's MICEX, however, has been far more muted, up 0.5 per cent by 1pm on Monday.

"We saw people buying dollars again and selling risk and that is exactly what is happening in Russia," said Ivan Ivanchenko, an equities analyst at VTB.

Most of Russia's concerns were priced in last month when it first became apparent that the Miracle in the Desert was more of a mirage and any subsequent gains are seen by some analysts as a chance to secure a small Christmas bonus.

"I would expect investors to use this chance to offload some risk at much higher prices then they would have done otherwise," said Ivanchenko.

In contrast to Dubai, Russia remains largely unleveraged, as well as being backed by a stack of cash in the shape of its reserve funds and foreign exchange holdings.

"I don't think there is any huge danger for Russia and actually the contagion effect was not really justified because Russia's fiscal position is so strong," said Tom Mundy, an equities analyst at Renaissance Capital.

Dangers to Moscow's bourses remain in the oil price, which slipped to below $70 last week, as well as the potential for worries over sovereign debt in more vulnerable economies spreading.

"The contagion for Russia in any environment where there is a default is that emerging market investors, as a group, tend to take risk off the table and that'll filter into Russia," said Mundy.

This contagion is now unlikely to come from the UAE, but risks remain in Eastern Europe and other emerging economies.

"It is clear that the UAE will stand by their federal states if there is a problem and I think that is what the market was worried about," said Mundy.

While fund flows continue to shrink as investors get into the festive spirit and wind down activity, volatility could be a short-term concern with oil trading near its 200-day moving average.

"Nothing is really happening and nothing is moving the market," said Ivanchenko. "If we see sharp moves in the oil price then, in the absence of liquidity, I wouldn't exclude sharp moves on the Russian markets as well."