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. Last Updated: 07/27/2016

Asian Crisis Drives Russian Stocks Down 14%




Russia's stock market joined those of Asia in a new bloodbath of selling Monday, falling more than 14 percent and prompting Federal Securities Commission officials to halt trading on the Russian Trading System for 30 minutes.


The Moscow Times Index of 50 leading shares closed at 239.60, down 14.42 percent on the day, the market's biggest fall since Oct. 28 when it lost 20.44 percent.


"It was very similar to what happened at the end of October," said Mikhail Koltsov, a trader at MFK Renaissance, recalling how instability in Asia's emerging markets prompted a massive investor exodus from emerging markets worldwide, including Russia.


Hong Kong's key index, the Hang Seng, keyed the chaos Monday, falling nearly 9 percent even as senior officials from the United States and the International Monetary Fund launched an emergency effort to calm Asian markets.


The main stock index in Japan fell 2.2 percent to its lowest close in more than 2 1/2 years. Share prices also fell in Singapore, Taiwan, Malaysia, Thailand, Australia and New Zealand.


But market prices were higher in two of the region's most troubled economies: Indonesia and South Korea. They also gained in the Philippines.


Jakarta bucked the regional trend on hopes that renewed talks between senior officials from the United States and the IMF could find a resolution to Indonesia's woes.


IMF First Deputy Managing Director Stanley Fischer, in Indonesia for meetings with President Suharto, said the talks went well but the outcome would not be made public until Thursday.


U.S. Deputy Treasury Secretary Lawrence Summers was expected in Jakarta later to follow up on Friday's intervention by President Bill Clinton, who stressed the need for Indonesia to comply with economic reforms attached to an IMF aid package valued at $43 billion.


In London, the blue-chip Financial Times-Stock Exchange closed down 1.4 percent. Germany's DAX index closed down 2.43 percent. The French CAC 40 index, which had been down as much as 3.5 percent early in the day, managed to claw its way back to end with a loss of 1.96 percent.


In New York, the Dow Jones industrial average fell sharply in the opening minutes of trading. But the market quickly rallied, and by early afternoon the Dow was up more than 40 points. Wall Street had lost 2.85 percent Friday because of growing concern over Asia's economic turmoil.In Russian markets, officials stopped trading on the Russian Trading System, or RTS, at 5 p.m. after the system's index of 107 shares fell more than 13.32 percent from a previous close of 322.83. It was the first time trading had been suspended since Oct. 28, when the world market crisis began having an impact on the Russian market.


Under rules developed after October and November's big one-day losses, the market automatically closes when the index falls more than 7.5 percent from the opening.


The system restarted trading at 5:30 p.m. only to see the index fall another 1 percent to 319.02 with $8 million changing hands. Volume on the day reached $94 million.


But Koltsov said the market was buoyed in after-hours trading when it saw that Wall Street had shrugged off its poor opening. "More deals were concluded after 6 p.m. than over the entire day," he said. "The market will certainly open higher tomorrow."


He and other traders, however, said they do not expect any significant growth this month. "It is worthless to wait for anything good in January," Koltsov said. "Maybe in February the necessary preconditions will appear."


Monday's losses erased gains that had been made since mid-December, when market liquidity slowly dropped going into the holiday season.


"The rally was inflated. Now it is circling back on itself," said a senior trader at a Western bank.


LUKoil, Russia's most widely traded stock, closed at $18.01, down 14 percent. National electricity monopoly Unified Energy Systems lost more than 16 percent to close at $0.2325 Monday.


Still nervous from the October market crisis, investors are waiting for market stabilization to avoid buying before the market bottoms out, analysts said. "Now clients intend to wait for the time when the trends will be absolutely clear and stable," said Andrei Ippolitov, director of Prospekt Investment.


He said there is new money waiting to come into the market, but that no one is quite sure when the gates will open.


"As soon as stabilization comes, our market will go up with a good tempo," Ippolitov said. "Investors need a start signal to buy."


Investor nervousness also spread to Russia's fixed-income market which had made a step toward stabilization Friday when yields moved below 30 percent on almost all long-term treasury bills. According to Skate information services, the average weighted yield for six-month GKOs surged to 32.19 percent from 28.52 percent Friday.Dealers said the decline in T-bill prices could also be the result of investors' intentions to hold on to their money in advance of an auction Wednesday of a 133-day issue.


"It seems to me yields will go down to 33 or 34 percent tomorrow," said Alexander Romashov, a T-bill dealer at ING Bank Eurasia.