Russian stocks have slid by almost 30% to a two-year low this quarter. This week, investors have been rattled further by the news that Russia has opted to recognise the independence of Georgia's two breakaway regions, signalling a further deterioration in Russia's relations with the West.
With the newly-confrontational relationship between Russia and the West set to endure, the perception of risk in Russia will stay high, forming a "negative backdrop for asset valuations", says Chris Weafer of Uralsib. Meanwhile, the Georgia crisis prompted investors to pull their money out of Russia at the fastest rate since the 1998 rouble crisis, with foreign exchange reserves sliding by $16.4bn in the week beginning 8 August.
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