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. Last Updated: 07/27/2016

Jordan Says Market Still Needs Help

Adding his voice to a chorus of concern about Russia's shaky financial markets, American banker Boris Jordan said Thursday the Russian government should take steps to shield itself from global financial turmoil and stem the outflow of foreign investors from treasury bills.

"If the crisis on world markets continues for another 2 or 3 months, it could seriously harm the whole reform effort," Jordan, chairman of one of Russia's top investment banks, MFK-Renaissance Capital, said at a news conference.

Jordan praised the Central Bank's decision to raise its refinancing rate to 28 percent from 21 earlier this month, but said it could be forced to raise rates by another "few percentage points" if the crisis continues. He said foreign investors had already pulled $4 billion out of the T-bill market in the past month and predicted withdrawal of another $1 billion to $2 billion in December.

Russian debt and equity prices have been hit hard by the worldwide flight from emerging markets. At the same time, financial crises in other emerging markets are threatening the stability of Russian T-bills, known as GKOs.

Investors from Brazil and South Korea -- whose currencies have come under pressure during the global turmoil -- have significant Russian T-bill holdings. Jordan estimated that South Korean investors had taken $2 billion to $3 billion out of the GKO market, while Brazilians had withdrawn approximately $1 billion.

"If the flows out of the GKO market continue, the Central Bank will have to use its reserves to buy up bills," Jordan said. The dwindling of the bank's reserves could force a devaluation of the ruble which would pose a serious threat to the Russian banking sector, he said.

"We expect some steps from the government to stabilize the market in the coming weeks," Jordan said. But he said the Central Bank could calm investors immediately by making the state of the financial markets more transparent.