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Markets ride Russian storm
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August 9, 1999: 10:17 a.m. ET
Moscow shares dip as Yeltsin sacks PM, but region shrugs off changes
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LONDON (CNNfn) - Global markets shrugged off the latest round of political turmoil in Russia Monday, barely a year after the devaluation of the ruble sent investors running for the emerging-market exits.
Russian president Boris Yeltsin, without explanation, sacked his fourth prime minister in 18 months, sending local equity markets into a tailspin before recovering in afternoon trading.
The benchmark Russian Traded index was trading at 97.19 towards the end of the session, a loss of 5.78 percent. "After the initial 'Oh my god' reaction when the market lost 15 percent, things have settled and we are seeing some buying, particularly in oil stocks," said David Longmuir, head of equities at Renaissance Capital in London.
Yeltsin fired premier Sergei Stepashin and appointed security chief Vladimir Putin as acting prime minister. "I think the markets are getting inoculated" to such changes, Longmuir said. "It shows that the Kremlin is interested in one thing: the survival of the ruling family."
The Russian equity market already had slid heavily since the start of July as world interest-rate fears and a reduced appetite for risk drove overseas buyers from the market. Prior to this the index had performed strongly through the first half, outpacing the S&P 500.
The German market, which is sensitive to Russia because of the high volume of cross-border trade between the two, failed to react to Yeltsin's move. Neighboring markets in Poland and Hungary also were down only slightly.
Debt markets also remained sanguine about the changes ahead of the latest attempt at renegotiating billions of dollars in Soviet-era debt with an international collection of creditor banks.
The major credit agencies still have Russia's sovereign rating on negative "creditwatch," which could mean a downgrade if talks fail to produce a timetable for repayments.
However, the rise in oil prices has buoyed tax revenues, which analysts said would relieve pressure on the ruble and avoid a repeat of last year's devaluation.
The ruble lost around 1 percent against the dollar as the Russian central bank showed little sign of intervention.
-- from staff and wire reports
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