Russian Shares Plummet 9%
With No Reprieve in Sight
By BETSY MCKAY
Staff Reporter of THE WALL STREET JOURNAL
MOSCOW -- Russian stocks resumed a precipitous plunge Monday,
grinding this once-booming market to a near halt as even a $22.6 billion
aid package led by the International Monetary Fund is failing to persuade
investors to buy back in.
Share prices have dropped 37% since the
IMF and Russian officials clinched a deal on
July 20 aimed at salvaging the country's
precarious finances. Now, investors are
worried that Russia still doesn't possess
sufficient funds to defend the ruble if there is a
major exodus from its bond market.
Share prices on the Russian Trading System
fell 9% on Monday, pushing the RTS Index of
leading shares to a two-year low at a close of 120.91, down 11.95 points.
In a sign of the market's illiquidity, volume fell to an anemic $15 million
from $22.7 million on Friday.
Analysts and traders said the immediate reason for the sell-off was the
feeble performance on Asian markets. But investors also appeared to be
reacting to a surge in Russian domestic debt yields to 112% from 90% for
benchmark one-year notes, nearly twice the official interest rate of 60%.
The government was forced to cancel a planned treasury-bill auction for
the third consecutive week amid weak demand for the paper, according to
a finance ministry official.
Russia had the best performing emerging stock market in the world in
1996 and 1997. But fortunes have flipped this year to make it the worst,
down more than 70% and still falling. The market is so quiet now that a
single trade can move the index significantly, said traders in Moscow, and
many trades are simply between local brokers. Traders said the slump will
continue the rest of this month and that the market may not pick up until
November or December. "No one is willing to take a bet on this market,"
said Dmitry Kryukov, a trader at MFK Renaissance, a Moscow
investment bank. "There are no buyers on the market at all," he added.
Lenders to Russia had hoped that the IMF-led package, which is being
disbursed under conditions of certain reform achievements and in tranches,
would calm this country's markets. But it has failed so far. Instead,
investors are taking a wait-and-see approach about whether the
government of Prime Minister Sergei Kiriyenko will manage to impose a
long list of tough reforms that has eluded Russian government officials for
years. Russia's foreign-exchange reserves have dropped sharply in recent
weeks, in a sign that investors are pulling out. But the government won
some relief when the central bank and Sberbank, the country's biggest
savings bank, agreed to roll over $9.91 billion in treasury bills this year.
Meanwhile, Russia on Monday received the first $300 million installment
of a $1.5 billion World Bank loan that is part of the IMF-led package.
More disbursements are to come as Russia meets agreements to boost tax
collections, regulate oil and gas monopolies, and institute other reforms. |
