Oct 13, 2008, 15:02 GMT
Moscow - Russia's exchanges suffered losses Monday on deteriorating oil prices, reversing an initial gain as markets remained impervious to news that the government plans to push through a new nearly 7-billion-dollar crisis control plan.
The drop was partially a delayed reaction to Friday's global share selloff, when Russian market regulators kept trading shut all day. It matched a decline in Russian shares in London on Friday, analysts said.
Moscow's MICEX and RTS 'should mark down more than 10% at the opening to catch up with Friday's ADR trading in London and in reaction to sharp falls in the price of oil, nickel and other commodities,' Roland Smith, head of research at Moscow-based Alfa bank, said in a note to investors.
The leading MICEX index dropped nearly 5 per cent, prompting regulators to halt trading for an hour at 15:08 (1108 GMT) in what has become a series chronic stoppages in recent weeks. The bourse, where most Russian shares are traded, traded at 666.82 points at 6 pm.
The dollar-denominated RTS was down over 6 per cent to 790 when it was also suspended a half hour before closing at 5:30 pm.
Government plans to start spending 175 billion rubles (6.7 billion dollars) through state-controlled Vnesheconmbank on Monday to bolster stock prices by boosting shares in state firms helped early gains on the MICEX. Those gains were led by banks Sberbank and VTB Group and power generator OGK-3.
'Support for Russian stocks may come from direct buying by the Russian government,' Smith of Alfa Bank said Monday. 'However, it was indicated that any buying will be done over the course of weeks and months, as the government is looking to accumulate stock at a good price rather than providing a splash of market support.'
Lawmakers on Monday also approved a crisis plan, which calls for higher deposit insurance at private banks. It also licenses the Central Bank to give out unsecured loans to state banks.
The plan hands 950 billion rubles (36.4 billion dollars) in loans to Russia's three largest state banks.
'(The package) has one goal: preserving the stability of our financial market,' President Dmitry Medvedev said at the signing of the bill Monday.
But trading on Moscow's bourse remained uncertain and investor confidence was shaken as market regulators halted the clock for the thirteenth time this month.
Authorities kept markets shut Friday after US stocks hit five-year lows, even though both indexes had gained steeply Thursday.
Moscow's markets have been hit by the drop in oil prices. Additional weakness has been caused as investors pulled out amid the global turmoil and over Russia's recent war with Georgia. Russian markets saw their worst week last week since the 1998 ruble default.
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