Photo by Reuters/Gazeta.ru
On Monday, October 6, the Russian market experienced perhaps the worst day in its history. Despite several trading pauses, total market losses equaled to 19 percent. Some Russian blue chip stocks lost nearly 40 percent. Declining oil prices didn’t help the markets either. The dollar-denominated RTS index dropped to 867 points, while the ruble-denominated MICEX halted trading when its index dropped by 18.66 percent, closing at 749.66 points.
Russian companies saw their equity value evaporate on both Moscow and London exchanges. In London, shares of Russia’s “Norilsky Nickel” lost 44.28%, VTB – 36.18%, “Tatneft” - 45,23%, «Uralkaly» – 47,78%, Rosneft» –39,77%, LUKoil – 36,09%, «Surgutneftegaz» – 31,25%, Х5RETAIL – 26,12%. In Moscow, “Norilsky Nickel” plummeted 37.67%, “Rosneft” – 27.41%, Gazprom – 24.42%, LUKoil – 24.16%, “Surgutneftegaz” – 22.92%, MTS – 21.21%, Sberbank – 16.32%, VTB – 24.5%.
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Sberbank, the largest bank in Russia, saw its stock fall more than 16% on Monday
The Russian market performance today was seemingly the worst in the world. Behind Russia came Indonesia, where the market dropped 10 percent. Japan's Tokyo Nikkei index dropped by 4.25%, Hong Kong’s HangSeng – by 4.97%, Shanghai’s CSI 300 – by 5.12%. French САС 40 dropped by 5.7%, British FTSE – by 5.53%, German DAX – by 5%. When the stock exchanges closed in Russia, they opened in America with ultimate losses in the Dow Jones Industrial Average of 3.17%, NASDAQ – of 4.13%, NYSE – of 5.5%. And it could have been worse, with the Dow down at one point almost 7% around 2 p.m. before rallying in late afternoon trading.
Russian analysts blame the crisis on the delayed legislation of America’s $700 billion bailout bill and the Fed's apparent helplessness to stop the fall, declining world oil prices, and sheer panic among global investors. “The halt of trading doesn’t change the situation anymore,” admits Anton Motovilov, an analyst for Univer Investment Group. Sergei Karyhalin of Kapital Group says, “Investors keep on running away from risk.”
“There is no light at the end of the tunnel,” said Aleksey Trunyaev, a trader for Aton Company, “I don’t see any real reasons for growth in the near future.” The only factor that calms market players is their belief that the market cannot fall in perpetuity. Anton Motovilov suggests that, “’The darkest hours are right before the sunrise.’ We might see some growth before the end of the year, because the capitalization of many companies at the moment is far below the value of their assets, which should motivate long-term investors to gain strong [long-term] positions."
However, one anonymous American wag noted in response, “There is another old saying: It’s always darkest just before the tornado!”
