God is not a broker

Russian stock indices set an absolute record of decline

Against the backdrop of the current global crisis, hardly anyone can be surprised by another depreciation of financial assets, and yet yesterday Monday was a special day. Psychological levels in the oil, currency and stock markets were simultaneously “broken”: the price of “black gold” dropped below $90 per barrel , the European currency exchange rate against the dollar fell to below $1.35 per euro, and finally, the Russian The stock market fell by 20% yesterday - the RTS index dropped below 1000 points. The panicky mood of investors is due to the fact that, in their opinion, there is no end to the financial crisis; moreover, the situation may worsen even further. It is not surprising that the Ministry of Economic Development now does not rule out that by the end of the year the influx of capital into Russia may turn out to be zero, although quite recently the forecast was at the level of 30-40 billion dollars.

To cope with the crisis, it seems that the value system will have to be revised. In any case, this is strongly recommended by Pope Benedict XVI. "Nowadays, when the big banks are falling apart, it is obvious that money can disappear at any moment and is of secondary importance," the Pope said yesterday. He emphasized that “only the word of God remains reliable.” The Pontiff called on those who build their lives, focusing “on success, career and money,” to take this circumstance into account.

Looking at how trading took place on the Russian stock market yesterday, it is difficult to disagree with the Pope’s words. Investors in panic sold already heavily depreciated shares of Russian companies. Their actions clearly demonstrated the fallacy of the opinion of some domestic officials, analysts and bankers that the “bottom” was reached in mid-September, when the Federal Financial Markets Service closed the exchanges for two days after the MICEX and RTS indices fell by 17 and 11%, respectively.

Yesterday the market crashed again. At the end of the day, the MICEX index fell by 18.66% to 752 points, the RTS index lost 19.1%, trading closed at 866.39 points.

The authorities tried to calm investors by stopping trading, but in vain. For example, at 13.35 the MICEX stopped trading in shares for an hour due to a decrease in the technical index by more than 5% relative to the opening level. At 14.35 trading resumed, but from 15.10 the session was interrupted for another two hours.

Trading on the RTS exchange was suspended for one hour from 14.05 for the same reason. By this time, the RTS index had already fallen by 14.3%, to 917.8 points. From 15.05 the exchange resumed trading in shares, but after 10 minutes it was necessary to stop trading in the securities of LUKOIL and North-West Telecom for an hour due to a drop in the current price by more than 10% compared to the opening level of the session. Then at 15.30 trading in all securities was suspended.

Although the suspension of trading failed to cool investors, the Federal Financial Markets Service does not intend to abandon the use of this instrument. According to the head of the service, Vladimir Milovidov, measures are now being developed that will allow exchanges to automatically stop trading if the market falls less deeply. “According to the technical index today, the maximum drop during the day is 15%. Maybe we can reduce this threshold. One of the options is up to 10%,” Mr. Milovidov told RIA Novosti.

However, not all market participants agree with the FFMS. “The Federal Financial Markets Service should retreat from the idea of ​​regulating the market by suspending trading in the name of maintaining normal stock trading, Alfa Bank analysts believe. -- Endless trading suspensions create distorted pricing and make the market unattractive even for speculators. Moreover, in a command-regulated market, the state risks losing budget resources intended to support investors and issuers.”

Prime Minister Vladimir Putin said yesterday that a specially created working group with the participation of the Russian President is developing measures to prevent the negative consequences of the financial crisis. However, we have to admit that so far the authorities’ actions to save financial markets have not brought the desired results.

“Panic selling was observed due to the fact that world markets, generally speaking, do not have much faith in the adopted plan of Paulson (US Treasury Secretary - Ed. ). For example, the positive reaction of American markets on Friday was only short-term. Then the fall continued. American futures added fuel to the fire, falling an additional 2.5% on Monday. At the last summit, European leaders decided not to create a stabilization fund to support banks following the example of the United States, provoking a 5 percent drop in the corresponding indices. Oil fell in price on fears of declining demand. Naturally, all this could not play into the hands of the Russian market,” states analyst at Brokercreditservice Investment Company Alexander Chabanov.

The leaders of the fall yesterday were Norilsk Nickel, which collapsed by 37.67%, Gazprom by 24.42%, LUKOIL by 24.16%, Sberbank by 16.32%. According to Alfa Bank's report, Norilsk Nickel's weak results for the first half of the year indicate a further decline in profitability in the second half of the year. “We believe that the reporting is negative for Norilsk Nickel shares, and we are placing the company on review to take into account significant changes in the markets for non-ferrous and precious metals caused by the global financial crisis, and to include new cost forecasts in our model,” bank analysts note .

Monday turned out to be an equally unpleasant day for European investors. Eurozone stock indices fell by an average of 8% yesterday, while the British FTSE100 fell by 7.85%. Two large European financial institutions at once - the largest financial company in Europe Fortis and the second largest mortgage bank in Germany Hypo Real Estate - found themselves on the verge of bankruptcy ( for more details, see page 8 ). "This is likely to be a tough week for global investors as they realize the credit crunch is here to stay," said DA Davidson & Co. chief strategy analyst. Frederick Dixon.

Russian analysts are no longer expecting anything good. “At the moment we see no reason for growth in the Russian markets,” notes leading analyst at InvestCapital Management Company Igor Kaznacheev. -- American exchanges have already lost more than 4.5% since the beginning of today's session, the Dow Jones index fell below 10 thousand points for the first time in four years. This will put pressure on domestic indices on Tuesday at the beginning of trading, in addition, problems with liquidity in the Russian banking sector are also not conducive to the emergence of buyers in the market.”

Stanislav Kleshchev, an analyst at the investment department of VTB 24, notes: “Trading in Russian ADRs in London showed that the domestic market could fall by another 10-15%. Moreover, unlike on September 16, the Russian government can hardly take any auxiliary measures, since in this case the reasons for the fall are completely determined by external factors.”

Against the backdrop of continued capital flight from stock markets, the dollar continues to rise in price both against world currencies and the ruble. Yesterday, the euro/dollar exchange rate fell to 1.3481 dollars per euro, the minimum value in 14 months. In just one trading day, the European currency fell by 2.1% (on Friday in New York the dollar cost 1.3772 euros). Moreover, analysts argue that yesterday’s collapse of the euro is by no means the limit, and in the short term the European currency may fall even lower. The main reason is the growing crisis in Europe, which could have an even more negative impact on local economies than in the United States.

According to Nikolai Kashcheev, head of the economic analysis department of the analytical department of MDM Bank, the collapse of the euro against the dollar is largely explained by the sentiments of investors who believe that the economy and financial system of Europe are in a more difficult condition than in the United States. “The European Central Bank has not yet taken any new measures, other than carrying out interventions to maintain liquidity, which gives traders even more reason to play short. The problem is that in Europe, unlike the United States, there is no unified financial policy,” says Mr. Kashcheev.

In his opinion, based on the current situation on the market, it is possible that the euro will continue to fall in price, perhaps to the level of 1.3 dollars per euro: “Still, the dollar is not the currency that can now save everyone from troubles , it just seems to be worse in Europe.”

“The dollar is now growing against all major world currencies with the exception of the Japanese yen,” states Alexey Borichev, head of the conversion operations and interest rate trading department of ING Bank (Eurasia), “Despite everything, the dollar remains a reserve currency for investors during a period of global instability in financial markets. In addition, Europe, unlike the United States, is just entering the acute phase of the crisis, and the depth of the decline of the European economy is still unclear. Therefore, investors now prefer to invest in the least risky dollar assets.”

In Russia, the dollar to ruble exchange rate increased by 1% - from 25.89 to 26.17 rubles. The situation at the Russian auction was completely dependent on what was happening in Europe.

The Bank of Russia yesterday was the main seller of currency. According to Mr. Borichev, the regulator sold about $5.5-6 billion. Market participants expect that the ruble will continue to depreciate against the dollar. A slight strengthening of the national currency can be expected at the end of the month, when the tax period begins and exporters begin to sell currency.

Nikolay KOCHELYAGIN, Natalya ROMANOVA