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 In Ukraine's Nikishino, No House Untouched by Fighting

Ninety percent of homes in one small village were damaged or destroyed as government forces failed to stop a rebel advance More

Pakistan’s 'Last Self-Declared Jew' Attacked, Detained

Argument about the rights of non-Muslims in Pakistan allegedly results in mob beating well-known Jewish Pakistani More

Turkey Cracks Down on Political Dissent — Again

People daring to engage in political dissent ahead of upcoming general elections could find themselves in jail 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.
In Their Own Words: Citizens of Kobanii
X
Mahmoud Bali
March 06, 2015 8:43 PM
Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Their Own Words: Citizens of Kobani

Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Ukraine's Nikishino, No House Untouched by Fighting

In the village of Nikishino, in eastern Ukraine, recent fighting has brought utter devastation. Ninety percent of the houses are damaged or destroyed after government forces tried and failed to stop rebels advancing on the strategically important town of Debaltseve nearby. Patrick Wells reports for VOA from Nikishino.
Video

Video Crime Scenes Re-Created in 3-D Visualization

Police and prosecutors sometimes resort to re-creations of crime scenes in order to better understand the interaction of all participants in complicated cases. A Swiss institute says advanced virtual reality technology can be used for quality re-creations of events at the moment of the crime. VOA’s George Putic reports.
Video

Video Sierra Leone Ebola Orphans Face Another Crisis

There's growing concern about the future of an orphanage run by a British charity in Sierra Leone, after a staff member and his wife died this week from Ebola. The Saint George Foundation Orphanage in Freetown is now in quarantine, with more than 20 children and seven staff in lock-down. The BBC has agreed to share Ebola-related material with Voice of America because of the difficulties faced by media organizations reporting the crisis. Clive Myrie reports from Sierra Leone.
Video

Video Growing Concerns Over Whether Myanmar’s Next Elections Will Be Fair

Myanmar has scheduled national elections for November that are also expected to include a landmark referendum on the country's constitution. But there are growing concerns over whether the government is taking the necessary steps to prepare for a free and fair vote. VOA Correspondent Steve Herman was recently in Myanmar and files this report from our Southeast Asia bureau in Bangkok.
Video

Video Nigeria’s Ogonis Divided Over Resuming Oil Production

More than two decades ago, Nigeria’s Ogoni people forced Shell oil company to cease drilling on their land, saying it was polluting the environment. Now, some Ogonis say it’s time for the oil to flow once again. Chris Stein reports from Kegbara Dere, Nigeria.
Video

Video Fuel Shortages in Nigeria Threaten Election Campaigns

Nigeria is suffering a gas shortage as the falling oil price has affected the country’s ability to import and distribute refined fuels. Coming just weeks before scheduled March 28 elections, the shortage could have a big impact on the campaign, as Henry Ridgwell reports for VOA.
Video

Video Report: Human Rights in Annexed Crimea Deteriorating

A new report by Freedom House and the Atlantic Council of the United States says the human rights situation in Crimea has deteriorated since the peninsula was annexed by Russia in March of last year. The report says the new authorities in Crimea are discriminating against minorities, suppressing freedom of expression, and forcing residents to assume Russian citizenship or leave. Zlatica Hoke has more.
Video

Video 50 Years Later African-Americans See New Voting Rights Battles Ahead

Thousands of people will gather to mark the 50th anniversary of a historic civil rights march on March 7th in Selma, Alabama. In 1965, dozens of people were seriously injured during the event known as “Bloody Sunday,” after police attacked African-American demonstrators demanding voting rights. VOA’s Chris Simkins introduces us to some civil rights pioneers who are still fighting for voting rights in Alabama more than 50 years later.
Video

Video Craft Brewers Taking Hold in US Beer Market

Since the 1950’s, the U.S. beer industry has been dominated by a handful of huge breweries. But in recent years, the rapid rise of small craft breweries has changed the American market and, arguably, the way people drink beer. VOA’s Jeff Custer reports.
Video

Video Video Claims to Show Shia Forces in Iraq Executing Sunni Boy

A graphic mobile phone video is spreading on the Internet, claiming to show Iraqi forces or Shia militia executing a handcuffed Sunni boy. Experts have yet to verify the video, but already Islamic State followers are publicizing it across social media, playing on deep-rooted sectarian fears. VOA’s Jeff Seldin reports.
Video

Video Ukrainian Authorities Struggle to Secure a Divided Mariupol

Since last month's cease-fire went into effect, shelling around the port city of Mariupol has decreased, but it is thought pro-Russian separatists remain poised to attack. For the city’s authorities, a major challenge is gaining the trust of residents, while at the same time rooting out informants who are passing sensitive information to the rebels. Patrick Wells reports for VOA.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9034
JPY
USD
120.24
GBP
USD
0.6550
CAD
USD
1.2440
INR
USD
62.254

Rates may not be current.