Russian stocks fall, adding to record slump, on rescue loans

Russian stocks fell, extending yesterday’s record drop, as a plan by President Dmitry Medvedev to lend billion to banks wasn’t enough to convince investors the government can halt its worst financial crisis since 1998.OAO Sberbank, Russia’s biggest lender, should get more than half of the planned loans at 500 billion rubles ( billion), and No. 2 bank VTB Group should get 200 billion rubles, Medvedev said today. OAO Lukoil, the country’s second-biggest oil producer, dropped after a spokesman said it had asked the government for loans to refinance its debt.

 

”Medvedev’s proposal is only positive if the banks pass it on through the system,” said James Beadle, an investment strategist at Pilgrim Asset Management in Moscow.

 

The new funds add to more than 0 billion already pledged to the country’s biggest banks in an attempt to get them to lend. The MosPrime interbank rate that Russian banks charge each other soared to 7.29 percent today from 4.75 percent at the end of last week.

 

Sberbank jumped as much as 11 percent to 39.05 rubles and was 2.5 percent higher at 4:57 p.m. in Moscow. VTB surged as much as 14 percent to 3.85 kopeks. The Micex Index fell 4.5 percent to 717.83, after losing 19 percent yesterday to the lowest since August 2005.

 

The government plans to approve new measures to help get funds to smaller lenders as soon as today, Deputy Economy Minister Andrei Klepach said at a meeting of the dominant United Russia party in Moscow.

 

Oil Funding

 

Lukoil is seeking between billion and billion to refinance loans, spokesman Dmitry Dolgov said by phone in Moscow today. Dolgov said other companies are also seeking government loans, including OAO Gazprom, the country’s gas exporter, OAO Rosneft, its biggest oil producer, and TNK-BP, BP Plc’s 50 percent Russian venture.

 

Marina Dracheva, spokeswoman for TNK-BP, and Nikolai Manvelov, spokesman for Rosneft, declined to comment immediately. No one at Gazprom was available to comment.

 

Gazprom sank 4.9 percent to 136.10 rubles. Rosneft fell 6.6 percent to 101.87 rubles. Lukoil declined 5.3 percent to 1,047.90 rubles.

 

Russia led the worst drop for emerging market stocks on record yesterday. The MSCI Emerging Markets Index fell 1.74 percent to 659.52, after falling 9.5 percent in the worst slump since the index was established in 1987. Russia’s dollar- denominated RTS Index fell 3 percent after retreating 19 percent yesterday, the biggest slump since the index began in 1995.

 

Mobius Buying

 

”When markets come down like this we add, not subtract,” Mark Mobius, who manages about billion in emerging market stocks as executive chairman of Templeton Asset Management Ltd., said in an interview from Milan today. “It’s a once-in-a- lifetime opportunity.”

 

Russian stocks dropped 62 percent this year, the fifth- worst among 88 national equity indexes tracked by Bloomberg, as falling oil prices exacerbated a selloff that began with the five-day war in Georgia in August.

 

Regulators have suspended stock trading nine times in the past three weeks, including this morning.

Russia is in talks to also provide a 4 billion-euro (.43 billion) loan to Iceland’s government to help ease its banking crisis, Iceland’s central bank Governor David Oddsson said in an interview today.

 

”The market was very heavily oversold yesterday, even by recent standards, said Julian Rimmer, a London-based director at UralSib Financial Corp., whose asset management unit oversees .2 billion.

 

”Share price are less meaningful than they were because of the volatility.”

The extra yield investors demand to own developing-nation bonds instead of U.S. Treasuries widened 2 basis points to 4.88 percentage points, a four-year high, according to JPMorgan Chase & Co.’s EMBI+ Index.

 

The yield on the Russian government’s 30-year dollar bonds fell 1 basis points to 7.48 percent, retreating from a four-year high, Bloomberg prices show.

Source: Agencies

 

Kavkaz Center