Russia halts trading

Russia halts trading for 1 hour

MOSCOW - TRADING on both of Russia's stock exchanges was suspended Monday after shares fell more than 15 percent on the back of falling oil prices and deepening fears about the global economy despite the passage of a US$700 billion (S$1 trillion) US bank bailout.

Trading on MICEX - where most trading takes place - was shut down at 1.35 pm (4.35 Singapore time) for one hour after shares dropped by 15.4 per cent to 781.8 points. The benchmark RTS - where trading was halted at 2.05pm (5.05 Singapore time) for an hour - tumbled to its lowest point since August 2005, falling by 14.3 per cent to drop below the 1,000-point mark at 917.8 points.

Russia's stock market in recent years has boomed amid high prices for oil and natural gas.

But the market began falling sharply in midsummer amid concerns about government interference with businesses, and the drop accelerated as the global economic crisis intensified.

Oil prices, the backbone of Russia's economy, have been sharply down in recent days - dropping to US$90 (S$131) a barrel - and investors have also been spooked by August's five-day war between Russia and Georgia.

In September, growing financial turmoil in the United States sent the Russian stock markets into their biggest downward spiral since 1998.

The MICEX lost 25 per cent in just three days. Regulators have shut down the markets on several occasions in an effort to stem the decline.

The government has also offered financial support to the stock markets, and a raft of relief measures to the banking sector, where liquidity is tight and confidence between banks at rock-bottom, leading to a seizure of interbank lending activity.

The measures offered only short-term support to the stock markets, however, and buyers are still scarce on the market. Between July and mid-September, UralSib analysts estimate investors have pulled out more than US$50 billion from the country.

After trading closed for the weekend in Russia, the US House of Representatives passed a US$700 billion bailout plan at the second attempt. But it provided little relief to investors, who are focused on deepening financial woes in Europe that threaten to derail global growth.

The bailout 'does not look set to bring much immediate relief to suffering markets,' Russia's Alfa Bank in a note to investors.

'With investors transfixed by the events in the US, buyers are scarce, and Russian markets are lurching downward on a day-by-day basis.' Banking stocks were among the worst hit in Russia.

State-controlled Sberbank, the country's largest lender - which at one point had plummeted 20 per cent in early trading - shed 15 per cent on MICEX, while the state-backed VTB banking concern also shed 15 per cent. Mining firm Norilsk Nickel plunged by 31.4 per cent on the RTS.

Of all major global indexes, the Russian stock markets have been among the worst performers. The RTS is down 62 per cent from its May peak. -- AP