|
Russian stocks regain vigor
|
 |
August 14, 1998: 2:56 p.m. ET
Promises not to devalue the ruble bolsters market, but rumors continue
|
NEW YORK (CNNfn) - Efforts by Russian leaders to deny a pending devaluation of the ruble helped restore lost confidence in the stock market Friday, but did little to quiet rumors in the international community.
After tumbling a gut wrenching 15 percent Thursday before being halted, the Russian Trading System electronic exchange clawed back up nearly 14 percent by the close Friday.
The leading RTS1-Interfax index closed 13.67 percent higher at 115.00 on thin volume of $23.6 million while the Reuters Composite Russian Index ended with a gain of 13.43 percent at 74.93.
The average yield on treasury bills was down to 161.10 percent from 164.02 percent Thursday while the ruble closed at 6.34 to 6.36 to the dollar.
Russian President Boris Yeltsin had a long telephone conversation Friday with U.S. President Clinton, the Kremlin press service said, giving no more details.
Following the Russian prime minister's lead, Yeltsin ruled out a devaluation of the ruble Friday and the country's central bank came out swinging against new rumors the country already had implemented a devaluation.
"The central bank declares, with all responsibility, that a ruble devaluation is out of the question," said Irina Yasina, a central bank spokeswoman.
"There will be no devaluation -- that's firm and definite," Yeltsin told reporters. "I'm not simply fantasizing. Everything has been calculated. Every day, work is done to control the situation in this area."
Although investors remain skeptical, H. Rivkin & Co. Russian market analyst Michael Barr said he believes Yeltsin's vow. According to him, the country is more likely to restructure its debt in order to get a better grip on banking stability.
"I think they'll do everything they can not to devalue the ruble," he said, adding the G-7 countries likely would go along with a debt restructuring because of Russia's "geo-political importance."
Moreover, he said, the country must begin aggressive steps to restore international confidence in its ability to ease volatility in Russia's economy. (308K WAV or 308K AIF)
International Fears escalate
On Thursday, Moody's Investors Service downgraded Russia's ceiling for foreign currency bonds and notes to B2 from B1.
"It is not clear where the money will come from," said Jonathan Schiffer, senior analyst at Moody's.
"We've been watching investor reaction to this. When you put the two together, the situation has worsened considerably since our last move, which was in May. This is simply not a short-term problem."
The chances of a devaluation of the ruble, he added, are now "greater than they were three months ago."
At the same time, Standard & Poor's cut its credit rating on the country.
Other analysts, including David Malpass, chief international economist for Bear Stearns, said instability in the Russian economy may soon begin contributing to malaise in other markets, including the United States.
According to Malpass, the commodities market, including agriculture and oil, will be hit the hardest. (317K WAV or 317K AIF)
Concerns over currency devaluation and worries the country may default on its loans have plagued the Russian market for months.
Those fears hit a fever pitch Thursday after billionaire financier and philanthropist George Soros urged Russian economic leaders to devalue the ruble and introduce a currency pegged to the dollar or euro.
In a letter published in the British newspaper Financial Times, Soros said the exchange rate should be 15 percent to 20 percent below the current rate to reflect the recent oil price collapse.
Central Bank deputy chairman Denis Kiselyov, however, dismissed the idea, saying exchange policies already in place would bring stability back to the banking system. 
|
|
|
|
|
|
The Russian Exchange
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
