- The Washington Times - Saturday, September 20, 2008

MOSCOW | Russia’s financial markets closed up by more than 20 percent Friday after a volatile session that saw trading suspended twice as stocks shot higher.

The RTS and MICEX stock exchanges were rebounding off the government’s efforts to rush through emergency measures that included more money for banks and purchases of shares to stem plunging prices.

Trading was halted twice after shares gained sharply, breaching technical limits. It resumed shortly before the markets closed.

Normal trading on both indexes was shut down Wednesday and remained closed Thursday after the MICEX — where most trading takes place — suffered one-day losses on a scale not seen since Russia’s 1998 financial collapse. It plunged 25 percent in just 2 1/2 days on the back of tumbling oil prices and Wall Street turmoil, and was down more than 55 percent since its May peak.

But in a rapid reversal of the losses seen earlier this week, the dollar-denominated RTS climbed by 22.4 percent to close at 1295.9 points on Friday, while the MICEX soared by 28.7 percent to 1098.9 points.

Banking and energy stocks were among the biggest gainers, with state-controlled banking concern VTB — one of the biggest losers earlier in the week — jumping by 60 percent on MICEX. State-controlled oil major Rosneft posted a 45 percent rise.

“I expect a very athletic time for the next few days to few weeks,” said Eric Kraus, an adviser to Otkrytiye brokerage. “Falling and rising in great percentages is to be expected.”

Stocks bounced back after the government rushed through a series of emergency measures — amounting to some $120 billion worth of relief — in the shape of increased liquidity to the banking sector and share purchases on the domestic markets.

Although the government was initially seen as slow to act, analysts applauded the efforts to stem the financial meltdown and head off the possibility of a wider loss of confidence spreading to the population.

“What they’ve done this week has been exactly the right thing and has been effective,” said Chris Weafer, chief strategist at UralSib. “The increased perception of Russia risk … is going to take longer to fix.”

While liquidity concerns continue to plague the market, banks borrowed just 166 billion rubles ($6.5 billion) through the Central Bank’s twice-daily “repo” auctions Friday, considerably below the record 362 billion rubles loaned Wednesday.

Elaborating on the scope of the share acquisitions, Finance Minister Alexei Kudrin said Friday that the government would invest primarily in state companies, and intends to boost its stakes in Gazprom, VTB, Alrosa and Rosneft to sell at a profit at a later date, the Interfax news agency reported. But he added that the state could also buy shares in listed companies that it considers undervalued.

Russia’s comeback came as global markets also staged a recovery Friday after the U.S. took steps to limit damage from a seize-up in credit markets after a week that saw the forced sale or government takeover of institutions including Lehman Brothers Holding Inc. and American International Group.

Speaking at an investors’ meeting in the Black Sea resort of Sochi, Prime Minister Vladimir Putin told investors that, because of Russia’s huge foreign exchange reserves and other surpluses, Moscow could still balance the budget for the next three years even if oil drops to between $40 and $50 a barrel. Oil has fallen below $100 after reaching a record $147 a barrel in July.

Despite assurances from the government, however, it may take longer for the wounds to heal, after investors suffered huge losses on the Russian stock markets.

“People were skinned alive,” said James Fenkner, managing director at Red Star Asset Management. “They got creamed…. It’s going to be a while before they come back.”

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