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

. Last Updated: 07/27/2016

Traders Stunned as Stocks Dive Again

Traders and analysts were in shock Friday, when, after Thursday's plunge of 10.89 percent, the stock market took another dive.

"Unfortunately, I'm a Russian market analyst," said a London-based banker, who asked not to be named. "Everybody is just hiding away."

The dollar-denominated Moscow Times Index of 50 leading shares fell 3.32 percent to 113.34 on low turnover of $12.283 million.

The RTS index closed the day with a loss of 1.19 percent at 141.71, recovering from a loss of 4.1 percent to 137.56 by the middle of the day.

It regained some inspiration after the U.S. markets opened up Friday.

The Nasdaq edged up 1.8 percent to 2645.5, up from its closing level of 2,597.92 Thursday, when it shed 4.03 percent. The index shrank 23 percent in November, its second-worst month in its history after October 1987.

The local market shed 24.1 percent on the month, following the U.S. big brother step-by-step. However, it appears to have hit the bedrock.

"These are absurd levels," said John Paul Smith, stock strategist with Morgan Stanley in London.

Brent oil futures hovered close to $32 per barrel Friday, so analysts scratched their heads looking at the sagging stock prices in Moscow.

"My estimate is that LUKoil will pay $1.80 per preferred share," said Ivan Mazalov, oil analyst with Troika Dialog.

LUKoil's preferreds edged up 3 percent to $8.50, promising a windfall yield to those who buy the stock at this level. Ordinaries were down 1.2 percent to $9.

"The market believes that LUKoil's managers were buying out the shares, reinforcing rumors that we will see either high dividend payments or conversion on favorable terms," said Kirill Surikov, head of sales with Alfa Bank.

But even though fundamentally stocks are crying out to be bought, the clients are on the sell side.

Bellwether Unified Energy Systems shed 1.6 percent to 7.95 cents per share, back to levels of spring 1996.

Many of the market participants reshuffled their portfolios seeing the emerging markets jitter and took short positions, selling the stocks and then buying them out at lower prices.

The flu that spread in Turkey could creep into other corners of the globe.

The Turkish XU-100 index fell 10.9 percent in midday trading, triggering a massive sell-off of emerging market assets.

Russia looks sour primarily due to its proximity to Turkey in terms of corporate governance standards.

"People fear untransparency in Russian firms," said Morgan Stanley's Smith. "In Turkey, it was banks' lack of transparency that fueled the crisis."

Morgan Stanley has a pessimistic outlook for the stocks in the developed economies, but the bank forecasts a bright future for the emerging markets.

"We are overweight in emerging markets and in Russia," Smith said.

He predicted the RTS index will top 300 next year.