The Russian stock market is back in freefall. For the second straight day, the dollar-denominated RTS exchange was shut down to stop horrific financial bloodletting, this time after less than half a day’s trading had taken place. The index plunged by over 4.5% and was artificially halted at noon Moscow time at the shocking value of 577. Mighty Gazprom’s shares were down nearly 6% as the price of oil continued to plummet precipitously. Once again the Russian market, supposedly a “leader” among emerging economies and “insulated” by fossil fuels from world market vagaries, bore the brunt of world losses and was easily out-performed by nations like Poland.
The ruble-based MICEX index, where most of the trading action occurs, was also hammered even more for second straight day and was down nearly 6%. Unbelievably, the MICEX was already flirting with dropping below 500, by noon having a value of just 528 points.
And yet, the Russian ruble still remained stable, almost a perfect flatline on the chart both in the past two days even though, as the two charts reveal, the last time the MICEX plunged the dollar soared. In fact, the chart actually betrays a slight uptick in value! Untold billions of rubles are being squandered by the regime as it desperately tries to stave off breakneck consumer price inflation, and loss of national prestige, should the ruble enter the same type of freefall as the stock market itself — squandered even though the regime has publicly admitted it can’t afford to do so. With the price of oil dropping below $50/barrel, the Kremlin risks total financial collapse if it continues on its current path.
The World Bank now says the Kremlin was lying when it claimed it would have net capital inflow for 2008, and will in fact have a net loss of investment capital of at least $50 billion. What’s more, economic growth projections were slashed from 6.8% to 6% this year and from 6.5% to a mere 3% next year.
UPDATE: In shamelessly brazen fashion, after the market shutdown the Kremlin entered the markets in a frenzy of buying and drove the RTS back into 600 territory. Who do these guys think they are fooling? The Russian stock market begins to take on the indicia of a pyramid scheme.