Investors Pull Money Off of Stock Market
Stocks were being sold with renewed strength yesterday. The Russian markets lost 3.76-4.16 percent and blue chips lost 4 percent, some of them hitting all time lows. The U.S. Federal Reserve Board's big interest rate cut (to 3 percent) has proven ineffective and foreign investors are pulling out of developing markets and increasing the portion of currency in their portfolios.
Trading on Russian stock markets ended at the lowest level in a week. The sell-off by provoked by events in the United States, after the announcement of GDP growth of 0.6 percent in the last quarter of last year, half of economists' predictions, in that country. But, while the U.S. market lost about 0.5 percent, the European markets dropped 1.1-1.8 percent in reaction, and the Russian markets more than 2 percent. The S&P announced it may lower the ratings on 8300 mortgage instruments and MBIA, the largest insurer in the U.S., announced losses of $3.5 billion. December personal income and spending were flat in the U.S. in December and unemployment was up.
The Russian markets went into a spin. The RTS index dropped 3.76 percent to 1906..97 points, and the MICEX index dropped 4.16 percent to 1574.33 points. The “people's IPO” companies fared worst of all. Vneshtorgbank lost 4.54 percent (for a total drop of 27.5 percent of its issue price), Rosneft lost 4.86 percent (to 15.37 percent below issue) and Sberbank lost 4.45 percent (1.24 percent below issue).
Emerging Portfolio Funds Research noted that the same trend is seen in all developing markets. In the first week of January, investors took $1.3 billion off those markets. In the second week, it was $850 million. In the third week $17 billion and, in the final week, about $19 billion. That is a new record.
www.kommersant.com
All the Article in Russian as of Feb. 01, 2008
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