News / Economy

Russian Markets Feel Heat from Ukraine Crisis

Armed pro-Russian separatists stand guard at a crash site of Malaysia Airlines Flight MH17, near the village of Hrabove, Donetsk region, July 20, 2014.
Armed pro-Russian separatists stand guard at a crash site of Malaysia Airlines Flight MH17, near the village of Hrabove, Donetsk region, July 20, 2014.
Reuters

Russian shares slid on Monday to a two-month low as Moscow came under fierce international pressure over the downing of Malaysia Airlines flight MH17 and European governments threatened to follow the United States in widening economic sanctions.

Monday's losses extended a near 8 percent slump last week provoked by Washington's imposition of sanctions on large Russian domestic companies, including oil major Rosneft which again fell sharply on Monday.

“There's no doubt that investors are uneasy - there are a lot of questions out there,” said Gazprombank strategist Erik DePoy. “It is an emotional time... the [airliner crash] has exacerbated tensions already there.”

Russian stocks are this year's worst performers among emerging markets, losing 12 percent in dollar terms compared with a 6 percent gain on the benchmark MSCI index as a whole.

At 1150 GMT, the dollar-denominated RTS index had fallen 2.15 percent to 1,249.9 points - down 9 percent since the beginning of last week.

The rouble-traded MICEX hit its lowest point since mid-May. It traded 2.1 percent lower at 1,393.3 points - down 7 percent since the start of last week.

The United States has presented what it says is overwhelming evidence of Russian complicity in the shooting down of the jet over eastern Ukraine last Thursday, and demanded President Vladimir Putin use his influence over pro-Moscow rebels who control the crash sites to allow international investigators free access.

Putin has blamed the Ukrainian military for the disaster, in which 298 people died, and said on Monday that everything must be done to guarantee the security of the international experts at the site.

Britain, Germany and France agreed at the weekend that they should be ready to ratchet up sanctions when European foreign ministers meet in Brussels on Tuesday.

Milder Falls

DePoy said the sell-off was an “across the board lightening of positions” but noted that the market had not fallen to the same degree as when the crisis first erupted with the fall of a pro-Russian president in Ukraine and Moscow's annexation of Crimea in March.

Companies targeted by last week's U.S. sanctions continued to fall. Rosneft was down nearly 2 percent in morning trading, bringing its fall since the beginning of last week to 7 percent. Gas producer Novatek, which was also slapped with U.S. sanctions, was down 1 percent, bringing its fall since the beginning of last week to nearly 8 percent.

The overall falls were bigger than those on overseas markets, where London's FTSE fell 0.2 percent on the day and the pan-European FTSEurofirst 300 fell 0.5 percent.

While hitting individual companies, the U.S. sanctions also make it more difficult for Russian companies to refinance existing international loans and has dashed hopes that the country's syndicated loan market is reopening.

The financial subindex on MICEX, a market capitalisation-weighted price index of Russia's top-tier and most liquid financial stocks, underperformed, traded 2.1 percent down on the day and losing nearly 9 percent since early last week.

Sberbank, Russia's largest lender was down nearly 3 percent and VTB, the second biggest, is also being hit. “Though not on the sanctions list, Sberbank and VTB shares will likely remain under pressure, along with the sector as a whole,” analysts at Morgan Stanley wrote in a note.

“The risk of a longer-term wider credit crunch increases as funding is limited, the cost is higher and therefore credit growth likely lower.”

The U.S. sanctions also increased the cost of insuring Russian debt against default - up eight basis points on Monday in the five-year credit default swaps market to 216 bps, according to Markit data.

This means it costs $216,000 annually to insure exposure to $10 million worth of Russian debt over a five-year period.

“We continue... to see further escalation of sanctions as probable, with the US continuing to set the pace; but it will likely be a protracted process,” said analysts at Deutsche Bank in a research note. “Despite the selloff, however, Russian asset prices are still well above the lows reached in mid-March.”

The rouble was slightly stronger against the dollar and the euro at 35.13 and 47.52, respectively, after losing nearly 3 percent last week. End-of-month taxes that force exporters to convert their foreign currency revenues into roubles aided the local currency.

The rouble was unchanged at 40.72 against the dollar-euro basket the central bank uses to gage the rouble's nominal exchange rate, but analysts say the worst is not yet over for the currency.

“There is a bit of stability [in currency and bond prices] after significant selling pressure last week,” said Sebastien Barbe, head of EM FX strategy at Credit Agricole in Paris, who said that talk the central bank may raise interest rates this week was supporting the currency.

“If you want to participate in this market you have to be a risk taker,” Barbe said. “It's hard to recommend long positions on rouble assets at the moment because its not economic risk or financial risk but political risk which is very hard to assess.”

You May Like

Video Miami Cubans Divided on New US Policy

While older, more conservative Cuban Americans have promoted anti-Castro political movement for years, younger generations say economically, it is time for change More

2014 Sees Dramatic Uptick in Boko Haram Abductions

Militants suspected in latest mass kidnapping of over 100 people in Gumsuri, Nigeria on Sunday More

Video Cuba Deal Is Major Victory for Pope

Role of Francis hailed throughout US, Latin America - though some Cuban-American Catholics have mixed feelings More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.