Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Markets Weather Political Firestorm




Russian markets recovered some poise Tuesday after being rocked by President Boris Yeltsin's sacking of Prime Minister Sergei Stepashin, but they remain vulnerable to fresh political jolts and unrest in the Caucasus.


Analysts said the ruble and stock market firmed in early trade amid expectations of continuity in economic policies if acting Prime Minister Vladimir Putin is confirmed in his post next Monday by the State Duma, the lower house of parliament.


But dealers attributed the ruble's stability in part to Central Bank intervention to support the currency for the second day running, while shares slipped from their highs because the morning rise had been "too far, too fast," one trader said.


Putin, if confirmed, would be Russia's fifth prime minister in 17 months. He faces an early test of resolve with unrest in the southern region of Dagestan, where he promised to deal swiftly with Islamic militants.


Martin Diggle, a director at Brunswick Warburg, said most of the original shock of Stepashin's sacking had subsided.


"People seem increasingly comfortable with the idea of Putin but uncomfortable with the ease with which Yeltsin can chop and change his prime ministers," he said.


Caren Gaboutchian, economist at ING Barings, said political volatility mostly affected the foreign exchange market, although the Central Bank had established a degree of predictability.


"However, if this political instability persists, I don't think the Central Bank has much room for maneuver," he said, adding that the International Monetary Fund would scrutinize implementation of policies agreed with Stepashin's government.


Analysts welcomed Yeltsin's commitment to holding a parliamentary election Dec. 19 and a presidential poll in mid-2000, for which he named Putin as his preferred candidate.


They also believed the Communist-dominated Duma would confirm Putin in his post, partly because of the elections.


Oleg Martynenko, head of domestic equities and fixed income at Alfa Bank, saw little foreign investment in Russia until after the presidential election.


"What Yeltsin did to Stepashin is another confirmation for the West that they have to wait for new presidential elections before deciding whether or not to invest in Russia," he said.