Moscow - Russian stock indexes plunged to the lowest levels since 2009 on Friday, two days before a referendum in Crimea that is expected to provoke western sanctions against Russia.
At 09:45 SA time the MICEX stock index was down 4.6 percent at 1,191 points after falling more than 5 percent to reach its lowest point since October 2009, while the dollar-denominated RTS index had fallen 5.1 percent to 1,023 points, the lowest since August 2009.
“People are panicking because of probable sanctions and international isolation. Who will need these shares then?” asked a trader at a western bank in Moscow.
Russian stock indexes have lost around 18 percent this month, after President Vladimir Putin received authorisation to send troops into Ukraine and pro-Russian authorities in Crimea prepared a referendum to approve the region's unification with Russia, a move that western countries condemn as illegal.
Russian markets are also reacting to negative moves in global markets, following falls of more than 1 percent on Wall Street on Thursday, and declines in Asian markets on Friday after weak Chinese industrial and retail data reinforced concerns about China's slowing economy.
“Besides the situation in Russia this fall was worsened by the story with the slowing Chinese economy,” said Maxim Gulevich, general director of UBS Securities in Moscow.
Shares in some less liquid stocks such as utilities and metals producers, which are typically volatile, fell by over 10 percent on Friday. Severstal was down 10.3 percent and Inter RAO was down 13 percent.
However the sell-off was indiscriminate, with liquid blue-chips also falling sharply.
Russia's largest bank Sberbank fell 5.4 percent, with gas producer Gazprom down 3.4 percent.
“On the whole shares are falling irrespective of sector,” said Konstantin Chernyshev, head of research at Uralsib.
“Of course illiquid shares in such a situation feel very bad, but it's liquid ones as well, because when investors begin to close their positions in such a period of turbulence they sell liquid shares first of all.”
In a morning note, Investcafe analyst Mikhail Kuzmin said: “Most investors prefer to insure themselves and are leaving assets.”
“The Crimean referendum on Sunday won't be recognised by the EU and US The decisions that will be taken because of it will be negatively perceived by foreign investors, which will most probably lead to an escalation of tension between Russia and the West and the introduction of real sanctions against our country.”
Russia's former finance minister Alexei Kudrin told Russian media on Thursday that the threat of western sanctions was already causing higher international borrowing costs for Russian companies, and that further sanctions would lead net capital outflows to reach around $50 billion per quarter.
In a report on Friday, Renaissance Capital estimated that the capital outflow in the first quarter will exceed $55 billion, compared with $63 billion in the whole of 2013.
The rouble was little changed before a central bank meeting on interest rates that is expected to leave an emergency rate increase in place.
On March 3 the central bank announced that it raised its key lending rates to 7 percent from 5.5 percent.
“We do not see any strong reasons for the regulator to change the policy rates at this point,” VTB Capital analysts said in a note.
“On the one hand, uncertainty related to geopolitical tensions remains too high to start reversing the recent temporary tightening measure, while on the other, intense savings' dollarisation, which is behind the current pressure on (the rouble), is unlikely to be sensitive to rate hikes.”
Over recent days the central bank has been buttressed by heavy central bank interventions aimed at keeping it within a floating corridor against a dollar-euro basket.
The rouble was down 0.1 percent to 36.66 against the dollar and down 0.1 percent to 50.81 against the euro.
It had fallen 0.1 percent to 43.04 against the dollar-euro basket, implying that the central bank has moved the corridor by a further 10 kopecks on Friday morning in response to its continuing interventions.
The central bank said that the corridor stretched from 35.95 to 42.95 as of Thursday.
It also announced on Friday that it had expended $2.66 billion in forex reserves on Wednesday, signifying large selling pressure on the rouble. - Reuters