Tuesday, August 11, 1998 Published at 17:33 GMT 18:33 UK
Business: The Economy
Russian shares nosedive
Russian traders watch share prices falling
The meltdown of Russian financial markets continued on Tuesday as freefalling stocks forced a temporary suspension of trading and bond yields rocketed to 150% amid fears of a rouble devaluation.
Stocks were dragged down further by the slide in world equities and Asian emerging markets and tumbling oil prices cutting revenues to the under-pressure Russian budget.
Trading was suspended late in the session, when losses exceeded those allowed under trading rules.
Dealing, last halted because of huge falls on May 18, resumed after 45 minutes and there was a slight rebound.
The Russian Trading System Index sank 9.1% to close at 109.9 points, down from 120.91 points on Monday.
Stocks are now at a level not seen since the market jitters of May 1996, linked to uncertainty over Boris Yeltsin's chances of securing re-election as president.
It was the second day in a row that Russian shares have spiralled downwards.
Mikhail Koltsov, a trader at MFK Renaissance said: "Nobody was expecting two such days in a row.
"People thought after yesterday the market would go lower but not so far.
"I don't know if there's a bottom, bottoms are very relative."
He said the RTS index could go below 100 or stage a mini-rally.
Russia's bourse, the worst performing stock market in the world this year, has now lost 72.6% of its value since January amid a mass investor exodus sparked by the country's financial crisis.
Gary Kinsey, a trader with Brunswick Warburg, said investors were concerned about possible debt defaults in other emerging markets after Indonesia announced it was rescheduling its debts.
"If it keeps going like this with bond yields at 150% there are questions over whether Russia could default," he said.
Defaulting ruled out
Deputy Prime Minister Viktor Khristenko tried to calm the jittery markets by announcing that the government was able to service its foreign debt.
"Default is not an issue here," Mr Khristenko said.
The government moved to ease the upwards pressure on yields by cancelling a Rbl 6bn ($1bn) bond auction set for Wednesday "due to unfavourable market conditions."
Other analysts said traders were waiting for evidence of improved tax receipts and monitoring the Central Bank's foreign exchange figures for evidence that the government's austerity policies were working.
Tax collection the key
A more efficient tax collection system is among the key economic reforms being demanded by the International Monetary Fund and others who put together a $22.6bn bailout package for Russia this summer.
An upbeat Prime Minister Sergei Kiriyenko, chairing a session of the Russian tax service, said on Tuesday that he expected state revenues to improve by up to 7% in August compared with the previous month.
The rouble meanwhile continued to slip against the dollar, losing over half a kopeck on Tuesday, falling to Rbl 6.294 to the $.
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