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Stock exchanges scared by Twist Operation. Rouble exchange rate is on the decline

September 23, 2011, 12:03 UTC+3

The collapse on the Russian stock market was the strongest in the past two years and a half

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MOSCOW, September 23 (Itar-Tass) ——The reaction of markets on the Twist Operation – a programme of the U.S. Federal Reserve System for boosting the national economy – turned out to be most negative, including in Russia. The collapse on the Russian stock market was the strongest in the past two years and a half. On Thursday stock-exchange indices fell by 7.6-8.6 per cent – more than at the industrially developed and developing countries. The dollar exchange rate on the Russian market exceeded 32 roubles and reached the highest level since August 2009. Uncertain actions of finance regulators induce investors to sell out risky assets without paying attention to fundamental indices.

The developments at Russian stock exchanges again reminded participants in the trading sessions, the same as early in August, of the panicky sales of 2008-2009, Kommersant writes. According to the information of the RTS stock exchange, the capitalization of the Russian stock market went down to 839 billion dollars on Thursday, as against 884 billion dollars on Wednesday. The Russian market lost in capitalization 250 billion dollars since the beginning of August. The Russian stock market became the outsider among the stock markets of the industrially developed and developing countries. Asian indices went down only by 0.6-2.8 per cent, and the European indices lost 4.7-5.3 per cent. The leading U.S. indices went down by 3.1-3.9 per cent by 21.30.

The investors’ flight from risks found its expression in the situation on currency markets, Kommersant continues. At the trading session at MICEX on Thursday the dollar exchange rate, marked ‘tomorrow,’ reached 32.1775 roubles per dollar for the first time since August 2009 and stopped at 32.0475 on the results of the trading session. During the 18 days of continuous decline the rouble exchange rate against the dollar lost 3.2 roubles. The value of the dual currency basket reached on Thursday the highest level since December 2009 and amounted to 37.0436 roubles – 35 kopecks up against the Wednesday closing figure.

Veronica Chekina, analyst of a big investment company, whose words are quoted by Novye Izvestia, is sure that investors responded too emotionally to the news from the United States. “Operators on the stock market were frightened not so much by the new FRS programme, as by the fact that forecasts on the restoration of the U.S. economy were pessimistic. The programme, suggested by FRS, is certainly specific, but its purpose is to improve the situation in the mortgage and housing sector. This is why, most probably, the markets will quickly get adapted to the news, and the figures will go up,” Chekina believes.

“The dollar is the only one to gain from this war of assets,” a trader from a Russian investment company told Vedomosti. Speculators sell the stock and buy hard currency, said Artyom Roshchin, trader of the Alba Alliance Bank, commenting on the situation.

Quotations of stock-exchange commodities are also on the decline. The price of gold went down by 2.2 per cent, and of silver by 6.8 per cent on Thursday, the newspaper continues. The price of Brent oil went down by 4.3 per cent to 105.64 dollars per barrel. This increased pressure on the rouble, dealers report. The value of the dual currency basket is coming close to the upper level of the floating corridor of the Central Bank – 37.15 roubles. Now the operators on the markets will, most probably, take a pause, waiting for possible massive interventions.

The situation is similar to what took place late in 2008, when massive purchases of hard currency were recorded, Natalia Orlova, chief economist of Alfa Bank, said in an interview with Vedomosti. She believes the process will be started, if the oil price goes down below 100 dollars per barrel. Three years ago the Central Bank started gradual devaluation: it supplied the market with liquid assets, collecting them through the sale of reserves. If the regulator again permits speculators to make money on operations with hard currency, it will only promote massive purchases of hard currency. Orlova hopes that the Central Bank learned the lesson and will not start gradual devaluation. It is possible that the Central Bank will not introduce a floating exchange rate of the rouble before the elections.

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