For the second day in a row stock prices in Russia dropped precipitously, causing the two major Russian stock markets to be shut down by the government.
BusinessWeek: The free fall continued on Sept. 17, causing Russia’s stock market regulator to suspend trading on both exchanges. The Russian central bank pumped a record $14.1 billion into the financial system, while the Finance Ministry said it would provide $44.9 billion in short-term loans to the country’s biggest banks.
Compared with the gyrations in Moscow, the 5% declines in other global markets look pretty mild. What’s more, the collapse in Russia is not simply a knee-jerk response to bad news elsewhere. Well before this week’s chaos on Wall Street, the Russian stock market was imploding. Since the beginning of July, the RTS has lost 64% of its value, equivalent to some three-quarters of a trillion dollars.
…With Wall Street in chaos, investors’ appetite for riskier emerging markets such as Russia seems bound to diminish. Putin recently predicted that foreign capital inflows would fall to $50 billion this year, down from $81 billion in 2007. “If foreign investors don’t buy debt and equity, Russian companies will find it harder to raise capital and therefore harder to grow,” says Kingsmill Bond, chief strategist at Russian investment bank Troika Dialog. “That is the Achilles’ heel of this market.”
That could ultimately spell serious problems not just for the Russian stock market but for the entire Russian economy.
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