A “bloodbath” in the Russian markets

published 19 September 2008

"On any other day it might be the dominant story," said the FT's Alphaville. But the US crisis wiped Russia's problems off the front page. Trading in "just about everything" bonds, equities and mutual funds was suspended on Wednesday, after the Micex benchmark plunged 10% in less than an hour, following a 17% dive the previous day. The finance ministry pumped $20bn into the interbank lending market and offered $44bn directly to the three biggest banks. And in a strange case of dj vu KIT Finance, a large investment bank, tried to hawk a stake in itself in an effort to avoid bankruptcy.

That Russia plunged at the same time as America was rather "paradoxical", said Andrew Kramer in the International Herald Tribune given that "Russia has far fewer trade and financial ties to the United States than other major emerging markets". While the collapse was initially a response to global turmoil, it was made much worse as investors who had bought shares on credit from their brokers were forced to sell their stocks. "It's a bloodbath," one banker told Kramer. It's been "eerily fascinating" watching the plunge accelerate every time leaders tried to reassure markets, said Pierre Brianon on Breakingviews. Their recent actions at home and in Georgia have made investors lose confidence in Russia's business environment. If this turns into a severe crisis, "there may be a silver lining there's nothing like real pain to foster serious change".