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Capital Flight
The Mechel case and war in the Caucasus have frightened investors much more than the financial crisis did. Russian indexes are falling more sharply than the world average, and yesterday the total capitalization of Russian companies fell below $1 trillion for the first time since June 2007. The Russian stock markets fell steadily yesterday from the beginning of trading. They fell 1.45-2.3 percent more than American and Asian markets. The selloff gained momentum after the publication of economic data in the United States indicating rising production costs there and investors waited to hear the results of the NATO emergency session on South Ossetia. The reaction of NATO to the events in that region was a source of uncertainty for the past several days. Yesterday, it became clear that relations were on the brink of collapse.
Russian Prime Minister Vladimir Putin tried to stave off the market’s fall in the middle of the day when he announced that the situation in the metals industry had improved since the discussion of pricing on that market last month. Then Federal Antimonopoly Service head Igor Artemyev announced the fine for Mechel, which was comparatively mild. The market did not turn around, however.
The MICEX index fell 6.01 percent yesterday to 1361.54 points and the RTS index lost 5.21 percent, falling to a new low since November 2006. Capitalization of the Russian market, according to the RTS, fell to $991.25 billion. Gazprom lost $16.618 billion in capitalization, and Rosneft lost $6.358. The oil company’s stock has fallen 1.34 percent below the cutoff price during its IPO. VTB stock is worth hardly more than half of what it was during its share placement in May of last year, and Sberbank shares are worth 29.9 percent less than during its SPO. Analysts are not predicting when the market will begin to grow again. They say the situation will eventually lead to trouble for Russian companies when they seek credit, since market conditions make Russian IPOs highly unattractive.
European markets lost 2.3-2.6 percent yesterday. By 9:00 p.m. Moscow time, U.S. indicators were down 0.8-1.6 percent, with Russian companies’ ADR down 0.19-6.55 percent. The exception to that trend was Mechel, whose ADR rose 2.16 percent.
К ТАБЛИЦЕ
Sharpest Falls in the Russian Stock Market in the Last 10 Years
Period RTS Index at Beginning of Period (points) RTS Index at End of Period (points) Change (%) Cause
July 17-October 5, 1998 193.35 38.53 –80.1 Default on Russian state bonds
April 12-July 28, 2004 781.55 518.15 –33.7 Bank crisis in Russia
May 19-August 19, 2008 2487.92 1685.60 –32.2 Charges against Mechel, war in the Caucasus
May 5-June 13, 2006 1749.52 1234.82 –29.4 Falling oil prices, rising refinancing rate in the U.S.
May 20-August 6, 2002 426.78 313.99 –26.4 Stock market crisis in Western countries
October 20-November 19, 2003 643.30 480.65 –25.3 The arrest of Mikhail Khodorkovsky
www.kommersant.com
All the Article in Russian as of Aug. 20, 2008
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