Russia closes stock markets after historic falls

October 7, 2008

, MOSCOW, October 7 – Russia on Tuesday froze stock market trading in a bid to stem investor panic that caused the worst-ever one-day fall on the benchmark RTS, now floundering 65 percent below its all-time high.

Russia\’s two main bourses said they were ordered to close by the country\’s financial regulator after stocks lost nearly a fifth of their value on Monday amid panic selling by global investors fearful of a deep worldwide recession.

The dollar-denominated RTS said it planned to reopen at 1:00 pm (0900 GMT), but a spokesman from the ruble-denominated MICES said it was not clear when full trading would resume.

Limited action on the MICEX did resume under "negotiated deal mode" — market jargon for clearing the backlog of prior buy and sell orders through oral agreement, without use of computers, Interfax news agency said.

President Dmitry Medvedev meanwhile convened a meeting at the Kremlin to examine Russian responses to the darkening situation.

"Various measures have already been taken and we will discuss various other proposals right now," Interfax news agency quoted Medvedev as saying at the start of the meeting.

The order from the financial regulator came after markets in Asia fell sharply, with shares in Tokyo falling more than five percent at one point on Tuesday.

In a global rout on Monday, New York\’s Dow Jones Industrial Average fell below 10,000 points for the first time since 2004.

Moscow-based analyst Chris Weafer described some of Monday\’s losses on the Moscow market as "insane," but said foreign investors would not come searching for bargains among undervalued Russian stocks any time soon.

"Until investors are convinced that (oil) will not trade down below 50 dollars per barrel, Russia risk is a fringe luxury that most global investors will avoid for now," said Weafer, chief strategist at investment bank UralSib.

"The country is not going bust and neither are any banks or major corporations…. But until some certainty in growth is established the market will remain speculative and volatile," he said in an email.

The benchmark index on the dollar-denominated RTS stock exchange suffered its worst-ever fall Monday, falling 19.10 percent to close at 866.39 points.

Among the worst losers was Russian gas behemoth Gazprom, down 24.42 percent at 5.20 dollars, number-two oil firm Lukoil, 24.16 percent lower at 40.50 dollars and top mobile operator MTS down 21.21 percent at 6.50 dollars.

The record lows came despite the enforcement by regulators of two trading suspensions on the RTS and three stoppages for the MICEX, which ended down 18.66 percent at 752.00.

"The main reason for the fall was the collapse of world markets, the forced selling of long positions and the total lack of buyers," said Vladimir Vedeneyev, an analyst with the Bank of Moscow.

"The market suffered the worst day in its history," he said.

Shares in Russia have fluctuated wildly in recent weeks, with regulators repeatedly forced to suspend trading and tighten controls in failed bids to stabilise the markets.

Such nervy fluctuations were exacerbated by doubts about the US bailout package as it faced a difficult path to Congressional approval last week.

The financial crisis, which started in the United States, has reportedly taken a major toll on housing and car sales in Russia, two closely watched sectors heavily dependent on bank financing.

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