Stock Market Misses Out on Global Gains

The wave of confidence that rolled across European and U.S. markets on Monday, pushing stock market indexes higher, did not make it to Moscow.

The RTS and MICEX markets, which had been closed on Friday, appeared to have been left behind with last week's worries, despite the government's promise to put $6.7 billion into Russian shares.

The dollar-denominated RTS Index closed at 791 points, losing 6.34 percent on the day. Trading was stopped at 5:30 p.m., in line with regulations calling for a freeze when the index falls by more than 5 percent.

Losses on the ruble-dominated MICEX Index also triggered a halt — for one hour in the middle of the day — before it closed down 5 percent, at 666 points.

"Even though European markets are up today, Russia isn't, because they have to incorporate what happened last Friday, when Russian stocks got hit really hard in London," said Erik DePoy, an independent market analyst.

"Today's decline in the local markets masks what is really going on. It is adjusting to what went on Friday. The expectation is that, starting tomorrow, it will be back in sync."

Russian stocks traded as Global Depository Receipts on London's FTSE Russia index were hard hit Friday, falling by 12 percent.

Shares on European and Asian markets rose significantly on Monday, after European governments announced plans to increase liquidity by pumping hundreds of billions of dollars in loans and share purchases into the financial sector. The Dow Jones Index was up by more than 500 points in early afternoon trading in New York on Monday.

One factor affecting investor sentiment on Moscow exchanges may have been their on-again, off-again operations in recent weeks.

"When you close the markets it causes delayed reactions, and this puts investors off," DePoy said. "If people need to go out and raise cash, then people will decide to trade in London."

Thomas Mundy, an equity strategist with Renaissance Capital, said a lack of information from the government was another problem fueling investor unrest. Mundy said this undercut the effect of Friday's announcement that the government would begin buying shares on Russian exchanges through state-controlled Vneshekonombank, also known as the Development Bank.

"There was lot of chat before the markets opened today about how it would work and what stocks it would effect," Mundy said, adding that there was also concern that state-controlled entities like Gazprom, Rosneft and Sberbank would be the prime beneficiaries.

Prime Minister Vladimir Putin announced the share-purchase plan on Friday but did not set out which stocks the government was planning to buy or when exactly the purchases would be made.

"The problem with these kinds of announcements is that it is difficult to know how they are going to do it and over what period of time they are going to do it," Mundy said. "There was speculation that it would be a good thing if it were more transparent."

While saying the broad idea was a good one, DePoy said investors were unlikely to be won over without a clearer idea of how the plan would work.

"It gets back to the old problem in Russia of implementation. The government is great at creating loans and making grandiose announcements, but nobody is willing to jump into the market on the expectation that the market is going to go up," DePoy said. It's an old case of 'show me the money.'"

Mundy cited X5 Retail Group's huge gains on Monday as an example of what clearer information can do.

X5, Russia's largest grocery store chain, closed up 25 percent on news that it had managed to secure loans from Sberbank and VTB.

Mattias Westman, CEO of Prosperity Capital, an investment company focusing on the power sector, said the mood behind bad days like Monday was partially the result of announcements like one from Onexim, which said Monday that it could not complete a mandatory offer to buy minority shares of southern power generator TGK-4.

Onexim, which had been required to make an offer for the minority shares after its holdings in TGK-4 rose above 30 percent, said it could not make the offer after the power generator was placed on a list of natural monopolies.

TGK-4 shares closed down 30.2 percent on the MICEX following the announcement.