MOSCOW, May 18 (AFP) - Russia's nervous stock and bond markets
plummeted on Monday on increasing fears that Russia could be the
next emerging market domino to fall, despite a government economic
strategy designed to reassure investors.
Share prices fell heavily, continuing a rapid downward trend
which saw 15 percent wiped from shares last week alone and about 40
percent since the start of the year.
Meanwhile, bond yields, symptomatic of the persistently high
interest rates which are crippling the Russian economy and saddling
the government with ever higher debt repayments, continued to spiral
upwards, and average yields touched 48 percent, traders said.
"It went down from the open and kept on going," said Gary
Kinsey, a trader with the Brunswick brokerage, of the stock market
plunge. "We are seeing some buying now but not of a nature that
would indicate any sort of rally."
At 6:00 p.m. (1400 GMT), the leading Russian Trading System
(RTS) index stood at 227.61 points, a decline of 12 percent from
Friday's closing value.
"There are worries about (ruble) devaluation, further worries
about what's going on in Indonesia," he said. "I really don't know
how low we can go before we start to see some significant buying."
Finance Minister Mikhail Zadornov blamed the market tremors on
continuing financial troubles in Southeast Asia, as well as on
parliament moves to cap foreign ownership in leading blue chip
Unified Energy Systems, which has lost some 20 percent this month
alone.
"I think that today's flucuations on financial markets are of a
short-term nature and we will be able to overcome the situation,"
Zadornov said, adding that the government would continue to support
the ruble and service its debt obligations despite the massive
sell-off.
The slump, which paused for breath only when automatic trading
curbs were triggered, came just hours after the government outlined
a short-term strategy designed to stave off investor panic.
The government, trying to juggle the demands of unpaid miners
with the urgent need for fiscal rigour, signalled its intention to
borrow less, to switch its debt issues into more long-term
instruments, and to concentrate on boosting tax revenues to finance
debt-servicing commitments.
It also pledged transparent economic policies and pointed to
positive first-quarter indicators, including data shopwing that the
amount of tax collected had risen by 16 percent from the figure the
previous year and an annualised deficit of 3.5 percent of GDP, to
persuade investors not to desert Russia's troubled equity and bond
markets.
The government also pledged to stick by the ruble peg against
the dollar. The central bank fixed the currency on Monday at 6.1465
to the dollar, but the currency was being traded at 6.19 by the end
of the day.
"Market operators should not face unexpected government
decisions," Prime Minister Sergei Kiriyenko was quoted as saying by
ITAR-TASS news agency, adding that the policy priority list was
aimed at enabling operators "to understand and see the government's
policies through the end of the year."
Investors have fled the Russian market this year, nervous of the
impact on the economy of the Asian financial crisis and its
aftershocks, a drop in oil prices, a key revenue earner for the
government, and a gaping hole in the budget.
Oil revenues alone are likely to fall short by 9-13 billion
rubles (1.5-2.1 billion dollars) this year due to low global oil
prices, ITAR-TASS quoted a senior ministry official as saying.
The conspiracy of factors have compounded a vicious circle of
poor revenue collection, fiscal gaps, burgeoning government debt and
higher interest rates.
The central bank signalled on Friday that the government was
determined not to panic, keeping the key refinancing rate on hold at
30 percent, despite nothcing up its Lombard credit rates.
On Monday, President Boris Yeltsin's economic advisor Alexander
Livshits stressed that the refinancing rate, the rate at which the
government buys back its own securities, would remain at 30
percent.
"The ruble is solid and the situation is stable enough,"
Livshits was quoted by Interfax as saying. "The Central Bank is in
full control of the situation." |
