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13 Oct, 2008 16:27

Russian markets fall as Government responds

Russia’s two stock markets fell further on Monday despite government intervention aimed at helping overcome the global financial crisis. At the close of trading, the markets were in the red, with Micex losing 3.48 per cent and reaching 666.31 points.

The opening of the exchanges came after both were closed on Friday in the wake of major sell-offs which engulfed Asia and Europe, and saw major global exchanges hit heavily. 

Despite trading on the exchanges being halted more than 10 times in the last two weeks, accompanied by new regulations which enable the Federal Financial Markets Service to order the exchanges to halt if they move beyond 5% of their opening marks on any day, Finance Minister Alexey Kudrin told journalists on Saturday that he saw little value in longer term closures.

“Now they are speaking about this measure more and more often,” he said. “But it will not change anything in principle: there will be an unregulated, off-exchange market. Then we will have to ban a lot of other things.”

While major global economies are attempting to coordinate responses to the crisis, the Russian Government is beginning to implement measures announced over the last week. 

Prime Minister Vladimir Putin has announced that Vnesheconombank will begin pumping more than 175 billion rubles ($6.7 billion) into the stock markets this week. Finance Minister Kudrin has announced that the government will move to enable Russian pension funds to invest in the country’s stock markets as well.

The State Duma passed a package of bills on Friday aimed at stabilising the financial system.  The measures include long term loans to major banks, depositor guarantees, and the underwriting of interbank loans and commercial lending.  These were signed into law by President Medvedev on Monday.

They come on top of an estimated $180 billion worth of liquidity enhancing measures already announced by the Government and the Central Bank of Russia.

The Russian measures come as global governments take their own steps. In recent weeks the U.S. has passed a $700 billion Troubled Assets Relief Program, with the British Government announcing more than £500 billion worth of support for its banking system.

On the weekend further support measures were adopted by the EU, in the wake of last week’s raft of national depositor guarantees by nations across the Eurozone, Australia and Hong Kong.

Germany is putting up a package worth 500 billion euros. The country’s government has adopted a law to create a stabilisation fund for the German financial market.

As German Chancellor Angela Merkel noted the law, which will be finalised by Friday, will become the cornerstone of Germany's new legislation of the stock markets.

France's President Nicolas Sarkozy announced 360 billion euro state guarantee to fund companies.