MOSCOW: Russia's rouble-denominated MICEX dropped below a key support level on Wednesday, with slipping crude prices and waning confidence of investors in the health of global economy pushing Moscow assets down across the board.
At 0820 GMT, MICEX was trading 1.7 percent down at 1,457.36 points, falling below 1,480, a level analysts saw as important for deciding future bets.
"Russian 'bulls' (lost) the growing momentum," Andrei Tolstousov, head of asset management at Grandis Capital, wrote in a note.
Tolstousov reckons, that with Moscow's trading behaviour staying so acutely sensitive to developments on global markets, MICEX can go down now to as low as 1,430 points - a level seen last in early September before the markets' euphoria on a new stimulus by the US Federal Reserve.
Russia's rouble-traded index RTS also fared badly on Wednesday, losing 2.5 percent on the day to trade at 1,473.05 points.
"The key factor, which now has an effect on market shares is coming from awaiting confirmation of the effectiveness or ineffectiveness of the stimulus actions taken by central banks across the world," Igor Nuzhdin, at Nomos Bank, said.
The Russian bourses underperformed the broad emerging markets MSCIEF index which was down 1.0 percent, behaviour typical of a beta market that outperforms when there is wide global optimism and quantitative easing but underperforms when risk aversion returns.
Steel and mining shares were among the top losers as has been traditional when investors start ditching risky assets. The metal and mining index on the MICEX exchange was down 2.7 percent.
The Russian rouble shared the fate of Moscow assets, losing additional firming support from the monthly liabilities payments that peaked on Tuesday.
Dropping crude prices - Russia's chief exports - intensified the rouble's slide. Front-month Brent futures have fallen below $110 a barrel, their second drop in three days, on worries that a fragile global economy could hit demand.
The rouble was 0.9 percent down at 31.25 against the dollar on the day. It lost 0.15 percent versus the euro to trade at 40.17 and it was down 0.53 percent at 35.26 against the dollar-euro basket the central bank uses to guide the rouble's nominal exchange rate.
The souring mood bodes poorly for the finance ministry's weekly OFZ treasury bonds sale, where 20 billion roubles ($646.20 million) worth of five-year papers are to be auctioned.
The finance ministry wants to sell the bonds at a yield of between 7.50 and 7.55 percent. The bonds closed on Tuesday at 7.54 percent and were yet to be traded on Wednesday.
Analysts expect scarce demand for the bonds from non-residents, who have been buying heavily into the Russian domestic debt for most of this year.
"And the demand from local players will also be limited due to the weakening of the rouble and rising interest rates on the money market," analysts at ING Bank in Moscow said.
Comments
Comments are closed for this article.