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. Last Updated: 07/27/2016

Russian Stock Prices Catch Yeltsin's Cold

News of President Boris Yeltsin's illness Wednesday sharply aggravated a slump already under way on the Russian stock market with equity and bond prices both taking a dive.

The Moscow Times Index of 50 leading shares lost 6.33 percent to close at 270.66.

But the index was still up 13 percent on the 239.00 low recorded Dec. 1, when Russian stocks took a battering in the wake of the crisis in Asia.

As analysts had predicted, the market opened lower Wednesday, continuing a trend that began late Tuesday. The correction, they said, was natural following last week's sharp rise on the market.

But when Interfax reported Yeltsin had been taken to the hospital with a cold for a 12-day stay, the market took a steep fall far beyond expectations.

Benchmark stock LUKoil fell to $21.1, down 5.5 percent. Unified Energy Systems lost even more -- almost 10 percent -- and closed at $0.2418.

"The correction became much bigger than the roughly 2 percent that I expected," said Andrei Galperin, senior trader at Creditanstalt Grant. "There are always panic mongers."

Some traders believe investors who were planning to come back into the Russian market will see Yeltsin's illness as readying the ground for ripe pickings.

"There is a lot of money which wants to flow [into Russia] before New Year," Galperin said. "Now these investors are sitting and rubbing their hands in glee." He predicted investors will start to buy next week.

Andrei Kukk, the head trader at Rinaco Plus, said the fall would stop Thursday. "I think we have reached the bottom or we'll see it tomorrow and the market will not go down further before New Year," he said.

But he didn't expect bargain hunters to begin aggressive buying before Jan. 1.

The correction halted signs of a rise in second-tier shares, and traders do not expect it will return in the near future.

"A not bad rise in the second-tier began this week," Galperin said. But he predicted that "they will fall asleep again next week."

The fixed-income bond market mirrored corporate shares. An auction of five-month paper Wednesday morning, before news of Yeltsin's illness, produced yields in line with market expectations, with average weighted yields on five-month paper of 33.92 percent compared to the closing yield on Tuesday of 32.05 percent. The afternoon auction was hurt by the announcement. however. The average weighted yield was 35.18 percent compared to a 31.41 percent yield, calculated from the closing price on Tuesday.