Russia Gives Banks Cash, Halts Stock Trading to Head Off Crisis
Wednesday, September 17, 2008
Sept. 17 (Bloomberg) — Russia halted stock trading for a second day, poured $44 billion into its three largest banks and relaxed restrictions on lenders to stem the worst financial crisis since the nation defaulted a decade ago.
The central bank slashed reserve requirements for banks, freeing up as much as $12 billion, and the Finance Ministry allowed OAO Sberbank, VTB Group and OAO Gazprombank to borrow the $44 billion for three months. The benchmark Micex index plunged as much as 10 percent, bringing its three-day decline to 25 percent.
Russia’s markets are facing the biggest test since the government defaulted on domestic debt in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation’s stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman Brothers Holdings Inc. and American International Group Inc. prompted a flight from emerging markets.
“I will tell my clients today to continue to abstain from buying Russian assets” until economic problems are solved, said Zina Psiola, who manages a $1 billion Russian equities fund at Clariden Leu AG in Zurich.
The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1 percent today, deterring speculative bets in equities. Russian stocks have lost more than $425 billion in value since reaching an all-time high May 17.
The Moscow-based brokerage KIT Finance said it’s in talks with investors to sell a stake after failing to meet some financial obligations related to repurchase agreements.
`Heightened Risk’
“Heightened counterparty risk means that the only place to raise cash is the equity market,” said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. “Every time the market opens we have selling to meet margin calls, which triggers stop-losses, more margin calls and redemptions.”
Wednesday, September 17, 2008
Sept. 17 (Bloomberg) — Russia halted stock trading for a second day, poured $44 billion into its three largest banks and relaxed restrictions on lenders to stem the worst financial crisis since the nation defaulted a decade ago.
The central bank slashed reserve requirements for banks, freeing up as much as $12 billion, and the Finance Ministry allowed OAO Sberbank, VTB Group and OAO Gazprombank to borrow the $44 billion for three months. The benchmark Micex index plunged as much as 10 percent, bringing its three-day decline to 25 percent.
Russia’s markets are facing the biggest test since the government defaulted on domestic debt in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation’s stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman Brothers Holdings Inc. and American International Group Inc. prompted a flight from emerging markets.
“I will tell my clients today to continue to abstain from buying Russian assets” until economic problems are solved, said Zina Psiola, who manages a $1 billion Russian equities fund at Clariden Leu AG in Zurich.
The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1 percent today, deterring speculative bets in equities. Russian stocks have lost more than $425 billion in value since reaching an all-time high May 17.
The Moscow-based brokerage KIT Finance said it’s in talks with investors to sell a stake after failing to meet some financial obligations related to repurchase agreements.
`Heightened Risk’
“Heightened counterparty risk means that the only place to raise cash is the equity market,” said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. “Every time the market opens we have selling to meet margin calls, which triggers stop-losses, more margin calls and redemptions.”
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