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. Last Updated: 07/27/2016

Equities Tumble 7% on Profit-Taking




Russian stocks fell steeply Wednesday as investors took profits amid a growing dispute between the government and energy companies over a crisis package designed to stave off financial collapse, traders said.


The Moscow Times Index of 50 leading shares fell 7.50 percent to 122.07 on a reported volume of $58.77 million, while the Russian Trading System's benchmark index fell 6.6 percent to 171.73.


Tumbling stocks following a global downtrend that ensued after U.S. Federal Reserve chief Alan Greenspan said there was a substantial risk of deterioration in troubled Asian economies and that inflation remains a threat to the U.S. economy.


Russia's oil stocks suffered after energy majors led by LUKoil accused the government of surrendering to "irresponsible" pressure from the International Monetary Fund to force through an austerity package which, they said, would aggravate economic and social strains in Russia.


LUKoil closed at $9.91, down a further 6 percent, having lost 8 percent Tuesday.


But much of Wednesday's selling also was motivated by profit-taking, as speculators looked to capitalize on a recent rally in which stocks rebounded from two-year low points and gained 40 percent in a week, buoyed by an IMF-led rescue for Russia.


"There has been a lack of good news," said Alex Gorelik, a trader with the Rinaco Plus brokerage. "People speculating on the good outcome of the IMF talks have sold off."


"We are seeing lots of profit-taking on a lack of any new good news," added Mikhail Koltsov, a trader at MFK Renaissance. "I suspect this might go on until the end of the week."


Traders said an auction of government bonds Wednesday had given investors little cause for cheer, despite hope that a restructuring of short-term debt completed earlier this week would ease the pressure on the government debt market.


In the auction, the government sold three-year bonds with a yield of 53.6 percent, raising just $3.3 billion in ruble terms, while $8.6 billion of government paper came due for redemption.


They added that the market was waiting for the government to fulfill a promise to improve tax collection, as well as for a rise of world oil prices, which would ease strains on the budget.


"Investors won't be doing anything until August and the next Duma session," Gorelik said, referring to the Russian lower house of parliament, which went on recess last Friday after gutting a crucial government economy crisis package. "Investors want to see some follow-through on what's been talked about."


The ruble also fell sharply in interbank trading Wednesday, shedding almost 4 kopecks against the dollar, Interfax reported.


The Russian currency was changing hands at 6.226 to the dollar, from 6.188 on Tuesday, a slide of 0.6 percent. The Central Bank fixed the official rate at 6.222 to the dollar, Itar-Tass reported, from 6.221 on Tuesday.


The ruble has teetered on the brink of a forced devaluation in recent months amid Russia's worst economic crisis since the early 1990s.


But government officials said Tuesday that the threat of a currency collapse had been averted by the IMF's approval Monday of the emergency aid package.