Georgia, whose credit ratings were cut on Friday after military clashes with Russia, was praised on Saturday by foreign investors, who contrasted its efforts to reassure them over the crisis with those of Russia.
Western bankers said that since fighting began in the breakway province of South Ossetia on Thursday, they had received phone calls and emails from Georgian leaders including Prime Minister Lado Gurgenidze.
They said Russia had made no similar effort, despite a plunge in its stock market on Friday which took the index of its most liquid exchange close to 21-month lows. The rouble also fell on foreign exchange markets.
Gurgenidze even held a private conference call with two major western banks at 1645 Moscow time (1245 GMT) on Friday, as towns in South Ossetia were under heavy fire from Georgian artillery.
"His main message was that the stock market is safe and there will be no bond defaults ... He's really great with investors, really great at reassuring us," said one banker who participated, asking not to be named as the call was not meant for public consumption.
The call, first reported on the website of U.S. political journal The Nation, focused on risks surrounding Georgia's only Eurobond, sold in April. The $500 million five-year bond was three times oversubscribed at launch as investors diversified away from the slowing developed world economy.
Participants in the conference call then received several emails from Gurgenidze's office.
"The Prime Minister has held throughout the day calls with investors and rating agencies and remains in touch with the investor community," said one email obtained by Reuters. Its subject line was: "No unusual economic activities or interruptions in Georgia today."
But the public relations blitz could not stop Fitch Ratings and Standard & Poor's downgrading the country, with Fitch saying the situation in South Ossetia had "materially increased downside risks to Georgia's sovereign creditworthiness."
Georgia's 2012 Eurobond dropped five points in price, to close at 90.50 percent of face value bid on Friday, according to Reuters data.
None of the three big ratings agencies has altered Russia's ratings, and Moody's Investors Service said the conflict should not change its rating of Russia's sovereign debt.
'Bloody Next Act'
Analysts neverthless said the conflict was destroying enthusiasm for Russian assets which had looked promising weeks earlier, given high oil prices.
"Today's events and their consequences are further deteriorating investor sentiment towards Russian assets," wrote Commerzbank analyst Michael Ganske in a research note on Friday.
"Last week's attack on Mechel's pricing behaviour by Putin and the lasting TNK-BP saga found a bloody next act in a screenplay that could be named 'how to destroy the investment story of one of the strongest credits in the emerging markets universe'."
Russia's Prime Minister Vladimir Putin stunned foreign investors last month by attacking the pricing policy of New York-listed Russian coal miner Mechel on live television, hacking its market value in half.
"Russia's not as concerned about western investor interest," the banker who spoke with Gurgenidze said.
"Georgia is very interested in western investment, and the prime minister in particular is very concerned about what investors think. If anything, Russia seems anti- that approach."
Gurgenidze held senior positions at Dutch bank ABN AMRO before going into politics and earned an MBA from Emory University in the United States. Other Georgian leaders are also largely young, western-educated and English-speaking.