Russia’s stock market lost over a tenth of its value on Friday, hitting its lowest levels since late 2004 as a further oil price fall cast fresh doubts over Russia’s ability to avoid a recession and defend its currency.
The rouble slid a further 23 kopecks to 27.23 rouble per dollar, touching a two-year low, as the US currency rallied on global markets.
The rouble’s slump continued despite interventions from the central bank, which spent a total of $US13 billion on supporting the currency this week, including $US3.5 billion on Friday, a Reuters poll of forex dealers showed.
"What we see is a huge liquidation. Liquidation of positions with big leverage, of those clients who used shares as collateral," said Timur Nasardinov from Troika Dialog.
"There is a global liquidation. But our Russian liquidity situation is much worse," he said.
Russia’s benchmark RTS index fell 13.68% and the more liquid MICEX bourse fell 14.24% before both were suspended by the regulator until Tuesday.
Investors regularly complain about Russia’s erratic trading hours and a drift in trading volumes to London, where most of Russia’s more liquid shares are traded. The Russian index for London-listed shares closed down 18.29%.
"It will most likely be a bad day in the U.S. today and on Monday in Asia. So the exchange will be shut on Monday," said Maxim Gulevich from UBS.
Nasardinov said the suspension will only cause further damage. "The situation with liquidity will be even worse: there will be sales abroad and no purchases here".
The state has pledged to start buying depressed stocks of state firms this or next week, although traders say state money may already have been used to buy shares.
On Thursday, Standard & Poor’s lowered its outlook for Russia to negative, warning of the costs of bailing out troubled banks at a time when Russian spends billions of dollars per day to support the currency.
Gold and foreign exchange reserves fell by $15 billion last week to $US515.7 billion. They were as high as $US598 billion at the beginning of August but the central bank says it could spend more to prevent panic spreading to the streets.
Margin calls grow
The cost of insuring Russia’s sovereign debt against restructuring or default (CDS) hit record highs this week, with the debt now classified as distressed.
"It is clear what must happen to shares when Russian CDS are at 1,000 points. The roots of all this are in the credit market," said Nasardinov.