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To: Bobby Yellin who wrote (16013)	8/17/1998 8:25:00 PM
From: goldsnow	Respond to of 116767

Swiss money managers fear Russia snowball effect 12:39 p.m. Aug 17, 1998 Eastern By Elif Kaban GENEVA (Reuters) - Russia's effective devaluation of the ruble and 90-day moratorium on some foreign debt repayments will cause tremors that will be felt across emerging markets and Western Europe, fund managers said Monday. One effect of the ruble crisis in Eastern and Central Europe is already being experienced, with bankers in Geneva reporting the start of redemptions from Swiss-run mutual funds invested in Hungary, Poland and the Czech Republic. ''It is a setback. It may have a snowball effect on other markets,'' said Ivan Pictet, managing partner at Switzerland's leading private bank Pictet & Cie. ''It will put a shadow on whole emerging stock and debt markets.'' Russia's move to shift the corridor in which the ruble is allowed to float amounts to a masked devaluation, bankers said. Bankers said they expected Russian bank defaults, but added it was too early to say if the ruble crisis would lead to an Asia-style currency meltdown if the ruble keeps falling, spreading panic. ''It's back to square one,'' said Oswald Reim, a money manager who heads the emerging markets team of UBS AG, Europe's biggest bank formed this year out of a merger of Union Bank of Switzerland and Swiss Bank Corp. ''The trust Russia had built up among international investors and among the local population has been destroyed,'' he said. ''Defaults are now very likely for Russian banks. If Russia announces a debt moratorium and if it cannot get any financing, it could also well be that we may see a default by Russia.'' Swiss fund managers said they would steer clear of emerging markets for a while and tread carefully in Europe. None surveyed by Reuters planned to go hunting for quick Russian bargains. From the Baltic states to the Czech Republic and from Southeast Asia to Latin America, fund managers said they expected emerging markets around the world to take a hit. The most vulnerable are markets in Central and Eastern Europe with greater dependence on exports to Russia, they said. Daniel Rezzonico, a senior fund manager at Geneva private bank Lombard Odier & Cie, said one industry under threat was pharmaceuticals in Hungary and Poland due to sales exposure to Russia. If investor sentiment shifts, Rezzonico said a currency carnage in Russia could cause ripples as far away as Switzerland and Germany, whose banks continue to have loan exposure to Russia despite having made provisions. ''Fund managers in Switzerland are nervous,'' he said. ''There is clearly a link to central European economies and also a risk of pollution of Western European stock markets. Volatility will remain in Russia until the end of the year and there will be a psychological impact on Europe,'' Rezzonico said. Jean de Haller, head of private portfolio management at Lombard Odier, said negative sentiment in Europe could further undermine the German mark and contribute to the strengthening of the Swiss franc. ''There is no major economic risk for Europe, but the impact will be psychological. Major problems in Russia will hurt the German mark and European markets and will speed up the corrections,'' he said. Bankers said most large Swiss banks had already cut their exposure to Russian assets significantly. Pictet said he had not observed any immediate capital flight out of Russia into Switzerland, a private banking hub considered a safe haven at times of crisis, because of the ruble crisis. ''I'd think there has been a bit of the reverse. All those big companies starving for cash, most with trading accounts abroad, must be in the process of repatriating funds,'' he said. Copyright 1998 Reuters Limited.

To: Bobby Yellin who wrote (16013)	8/17/1998 8:32:00 PM
From: goldsnow	Respond to of 116767

Russia's Bond-Market Rout Hits Shareholders of Emerging Markets Debt Funds Russian Bonds Batter Emerging Markets Debt Funds: Mutual Funds Boston, Aug. 17 (Bloomberg) -- Russia's bond market rout means hefty losses for shareholders of numerous emerging markets debt mutual funds, some of which recently allocated more than a fifth of their assets to the Russian market. Funds with big stakes in Russia included the Morgan Stanley Institutional Emerging Markets Debt Fund, the Scudder Emerging Markets Income Fund, the Phoenix Emerging Markets Bond Fund and the Aim Global High-Income Fund. ''These aren't obscure funds by any means,'' said Gregg Wolper, international fund editor at Morningstar Inc., the Chicago-based research firm. ''They're managed by some of the most prominent names in emerging markets investing.'' The Russian debt market plunged after the government said it will allow the ruble to fall by as much as a third this year and will extend repayment of about $43 billion in short-term debt to ease a cash crisis that has pushed the government to the brink of default. Russia also declared a 90-day moratorium on the repayment of foreign debt owed by Russian commercial banks and other private borrowers to avert a string of bank failures. The result: The Russian bond market declined about 19.1 percent today, said Peter Lannigan, manager of the $100 million Phoenix Emerging Markets Bond Fund, which has about 18 percent of assets invested in Russian bonds. ''That's some drop,'' Lannigan said. The decline was so severe because the government lied, he said. Russian politicians were saying as recently as this weekend that they wouldn't devalue the currency. 'They Lied' ''They lied and that's unfortunate,'' Lannigan said. ''Hopefully, they'll see the market's reaction and take note. The Russians have to start thinking about how the market responds to policy actions that they take.'' Lannigan's fund wasn't the only one in the U.S. holding a lot of Russian debt. The Morgan Stanley Institutional Emerging Markets Debt Fund had 26.5 percent of assets invested in Russian bonds as recently as July 31 and the Scudder Emerging Markets Income Fund had 19.5 percent of assets in dollar-denominated Russian debt as recently as July 31. The Russian debt market has risks, but yields are high so if the government can develop a ''sensible'' financing program and demonstrate an ability to increase tax revenue in the next couple of months, the market should rebound, Lannigan said. A big concern is that the volatility in Russia will heighten volatility in other emerging markets. ''It's quite possible that governments in Brazil, South Africa and to a lesser extent Argentina will face market pressures that could continue to roil their currency markets,'' said Craig Munro, co-manager of the $250 million Aim Global High- Income Fund, which has about 12 percent of assets in Russia. The situation remains chaotic in Russia, Munro said. The devaluation did little to answer lingering concerns about the country's economic and social crisis, Munro said. ''We're supposed to know more on Wednesday when the government releases details about the debt restructuring,'' he said. Fund List Below is a list of some emerging markets debt funds with large holdings of Russian securities and year-to-date returns as of Friday. Y-T-D Amount in Russia Return Morgan Stanley Emerging Mkts Debt 26.5% (as of 7/31) -15.3% Scudder Emerging Markets Income 19.5% (as of 7/31) -15.1% T. Rowe Price Emerging Mkts Bond 18.8% (as of 6/30) -12.2% Phoenix Emerging Markets Bond 18.0% (as of 8/14) -21.7% Alliance Global Dollar Government 16.0% (as of 6/30) -13.0% Aim Global High-Income 12.0% (as of 8/14) -15.1% Fidelity New Markets Income 9.2% (as of 6/30) - 8.8% bloomberg.com