By Rachel Morarjee in London, Thomas Escritt in Bucharest,and Charles Clover and Catherine Belton on Moscow
Published: October 9 2008 03:00 | Last updated: October 9 2008 03:00
Regulators in Russia, Romania and Ukraine slammed the doors of their stock exchanges yesterday in an effort to reduce the impact on central and eastern Europe of the global financial crisis.
Russia closed its market for two days as a wave of margin calls sent stocks spinning down despite a government pledge the day before to pump $37bn (€27bn, £21bn) in long-term loans into the biggest state banks.
The RTS fell more than 11 per cent and the Micex was down 14.4 per cent before trade was suspended.
Russia's central bank said it had extended the list of banks that could take part in its repo auctions to include institutions classified as having problems.
Ruben Vardanyan, chairman of Troika Dialog, the Moscow investment bank, said the Russian government must act beyond the funds it had pledged to restore confidence. "When Surgutneftegaz [the Russian oil company] is worth less than the deposits it holds in one bank and the entire Russia oil and gas sector is worth less than Petrobras [the Brazilian oil company] this has nothing to do with the market."
More than $200bn in liquidity boosting measures introduced by the Kremlin since mid-September have failed to stem the fall of the stock market or unfreeze Russian credit markets.
The Bucharest Stock Exchange in Romania suspended trading yesterday morning after sharp falls in early trading. The exchange's board announced the suspension after the BET index plunged almost 15 per cent per cent in just over an hour's trading.
Last week Mugur Isarescu, governor of the country's central bank, said deposits in Romanian banks were safe, and that the government was prepared to provide liquidity to help any institutions in trouble.
But Credit Suisse advised investors to reduce their exposure to markets in eastern Europe, saying they faced some of the same macroeconomic risks as Iceland.
As governments were forced into financial rescue packages of increasing magnitude, the countries most at risk of worsening credit positions were the Baltic states, Bulgaria, Romania and Ukraine, the brokerage said.
In Ukraine, the market was shut before trading began for the day, while in Bulgaria the main Sofix index hit a four-year low mid-session before closing down 7.5 per cent. The Sofia bourse temporarily widened maximum trading ranges on the exchange to 30 per cent from 10 per cent to avert a possible suspension of trade.
Markets in the Baltic states of Latvia, Lithuania and Estonia fell between 6 and 8 per cent, while Poland's benchmark WIG20 fell 1.3 per cent.