MOSCOW — Russia’s MICEX stock index plummeted to its lowest level in nearly three years today, as tumbling oil prices and turmoil on Wall Street highlighted investor concerns about Russia’s commodity-driven economy.
While the benchmark RTS index retreated by 11.5 percent to close at 1131.12 points, MICEX, where most trading takes place, plunged by 17.5 percent to close at 881.17 points — its biggest one-day fall since 1998.
Since its May high, the RTS has lost more than half of its value; MICEX is down 55 percent since May.
The latest round of selling in Russia was sparked off by a wave of margin calls as the RTS pushed down through 1,200 points, analysts said. A margin call is when brokers require clients who have borrowed money to buy shares to put up more collateral.
Russia’s domestic markets have been roiled by the decline in oil prices, which have plummeted from a July high of $147 per barrel to around $92 Tuesday amid fears that the U.S. credit crisis will eat into economic growth and diminish demand. Russia’s government is heavily reliant on oil revenue, and the two indexes are dominated by commodity-based companies.
“We need to see the oil price slowing down,” in terms of its decline, said Chris Weafer, chief strategist at UralSib bank.
“Right now, that’s the most decisive factor for Russia.” Stocks sold off heavily on Monday on news that Lehman Brothers Holdings Inc., the 158-year Wall Street institution, had filed for bankruptcy, and Bank of America Corp. had stepped in to rescue Merrill Lynch. Credit rating cuts at troubled insurer AIG added to the jitters.
Monday and Tuesday’s market drops extend a monthslong decline in Russian equities amid concerns over the government’s role in a damaging dispute at Anglo-Russian oil venture TNK-BP, and Prime Minister Vladimir Putin’s public assault on steelmaker Mechel over price-fixing allegations.
Russia’s invasion of Georgia last month, which has escalated tensions with the West, sparked off a $7 billion outflow of net capital in a matter of days.
Russian leaders have sought to reassure investors and businessmen, pledging to prop up flailing equities with state funds, while calling on business to pool funds to stabilize the markets. The government has also promised to pump more money into the banking system, which is suffering from a liquidity squeeze in the runup to October tax payments.
The Central Bank provided a record 361 billion rubles ($14.1 billion) on Tuesday at its daily “repo” auctions — through which it loans money to domestic banks.
Steel firm Severstal said Tuesday it would buy back some of its own shares, while Lukoil oil major shareholders Vagit Alekperov and Leonid Fedun have topped up their holdings. Dairy firm Wimm-Bill-Dann — whose share price has plunged more than 50 percent since January — is also considering that option.
Oil company Rosneft led the blue-chip decliners on the RTS, dropping by 19.1 percent. Natural gas giant Gazprom shed 17.2 percent. State-controlled banking group VTB fell 32.5 percent on MICEX, and state bank Sberbank by 20.8 percent. Rostelecom retreated from a 21.4 percent drop on MICEX to trade down 16.3 percent. Both stock indexes suspended trading for an hour before the close of business.
“People’s heads are kind of spinning at this point,” said Erik DePoy, a strategist at Moscow-based Alfa Bank. “You reach a point now in these crisis situations that’s absolutely unpredictable. …
We could go down another 20 percent from here, or it could turn on a dime and have a violent snapback.”
