Updated September 17, 2008

   The problems of the American financial organizations resulted in the direst collapse at Russia’s stock market. The indices of RTS (Russian Trading System) and MICEX (Moscow Interbank Currency Exchange) lost 11,47% and 17,45% respectively, and equaled the levels of 2005-end. The stock exchanges were forced to stop the trades. The experts warn that the worst is ahead, since in the nearest future, the collapse of the market will lead to the serious problems with the lending of the Russian companies, and some of them can go bankrupt.

   The range of negative news from the USA led to the correction at all world floors on September, 16. After Lehman Brothers Bank had gone bankrupt, the largest US insurance company, AIG, declared about the analogical financial problems. As a result, the European indices lost 1,63-3,43%, the Asian – 4,9-5,4% (the day before, the American indices fell by 3,6-4,42%). The market participants expected that within the meeting, the Federal Reserve System of the USA (FRS) would reduce the discount rate, however it was remained unchanged – 2%.

    Neither of the western floors faced such collapse, as the Russian stock market. The situation aggravated, when the oil prices fell (at 20.30 Moscow time, the futures on Brent oil fell by 4,37%, to $90,12). On September, 16, the collapse of Russia’s market started at the very opening, and due to the sharp quotations’ drop, the stock exchanges had to suspend the trade in some stocks (Rostelecom, the Savings Bank, TGC-7 etc.) for an hour or even till Thursday, September, 18, and they will resume their work after the Federal Financial Markets Service (FFMS) issues the corresponding permit. At 16.42 Moscow time, the drop of the MICEX index was 16,6%, and the stock exchange stopped its activity for one hour.

   The stock exchange didn’t take such decision since June, 13, 2006. At 17.00, RTS stopped the trades as well. "Then, the core trade in the Russian securities took place in London", the director for investments of Gazprombank Asset Management MC Andrey Zokin says. At 17.42, MICEX resumed the trades for three minutes. The players took advantage of it to continue the trades. According to the results of the day, the MICEX index lost 17,45%, and settled at the level of 881,17 points. The stock exchange didn’t record such values of the index since November, 2005. "The market doesn’t have the bottom because of the shortage of the buyers", the head of the group for stocks management of Renaissance Investments Management Anton Rakhmanov states.

   According to the trades’ results of September, 16, the capitalization of Russia’s equity market, calculated on the basis of the securities traded at RTS, fell by 10,95% and attained $682,594 billion. Since the beginning of the year, the capitalization fell by 48,63%.

   On September, 16, the stocks of VTB Bank at MICEX fell by 29,26% and cost 76% lower than the price of the placement. The securities of the Savings Bank lost 21,72% (59,55% lower than the placement), Rosneft – 21,27% (34% lower than the price of the placement). Gazprom’s capitalization fell by $31,96 billion.

   "The current prices can’t be explained at all", the asset manager of Alfa Bank Andrey Kilin states. "The majority of the companies are traded lower than their own capital, and capitalization of some of them is even lower than the amount of facilities on the bank accounts". The experts mark that the key ground of such severe collapse is the full closing of the repo market on September, 16. "The investors, who were taking securities on the lending resources, were asked to return the money", Anton Rakhmanov explains. "The players had to close their positions, because there is no money".

   "We will have much leisure time soon, since the emergence of the Russian "Lehman Brothers" is inevitable", some traders surveyed said. The majority of the clients don’t even call their managers, and nobody knows, when the collapse stops. "The only thing we can do now is to hedge the portfolio by means of the derivative instruments", Anton Rakhmanov supposes. "However, the risks remain even in this case".

   The experts agree that in the nearest future, the collapse of Russia’s market will result in the chain reaction and its consequences will emerge in all sectors of the economy. "There is the total absence of limits at the market: neither investment banks, nor brokers trust each other", the senior analysts for investment strategy of VTB Capital Ivan Ivanchenko marks. The companies that were taking loans on their securities could face the troubles now. "If loans have been taken on security of stocks, they will move to the new owners at the drop of the security price", Andrey Kilin is convinced. He marks that as a result, the majority of the companies will change the owners, and some of them will go bankrupt. "Obviously, in the nearest future, the limits for small companies will be closed, and they will neither have any opportunity to take loans, nor to hold repo, and they will have to cut their positions", the director for investments of Gazprombank Asset Management MC Andrey Zokin forecasts. "The companies will not have new projects, and the old ones will be refunded or sold at the low prices", Ivan Ivanchenko supposes. According to his opinion, this process affects the companies of the real estate market foremost. "The companies will cut their expenditures and this will lead to the dismissals of employees", the expert forecasts.

   In Andrey Zokin’s opinion, the most pessimistic scenario has little probability, but if it is implemented, the companies facing the problems with the attraction of the capital will be in the technical default, they will not be able to settle the payments, and will go bankrupt, as well as their contractors.

   "More and more companies will try to improve their market condition by means of the stocks buyback", Andrey Kilin marks. Norilsk Nickel MMC, Novatek, Severstal and Wimm-Bill-Dann have already declared about the buybacks of their stocks; and due to this step, the stocks of these companies looked better than the market on September, 16.

   The state can support the market as well. On September, 16, Prime Minister Vladimir Putin reported that the Russian Finance Ministry and the Central Bank allocated RUR 475 billion to support the liquidity at the Russian market, and marked that Russia would "easily pass through" the dire phenomena of the world economy. Moreover, the first Vice Premier Igor Shuvalov headed the emergency meeting in the State Duma devoted to the stabilization of Russia’s financial market.