Russia's Micex Index Falls Most Ever; Exchanges Suspend Trading

By Bradley Cook and Will Mauldin
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Sept. 16 (Bloomberg) -- Russia's Micex Index plunged a record 17 percent, prompting the exchange to halt trading, after the cost of borrowing in dollars overnight more than doubled and oil prices tumbled.

OAO Sberbank and OAO VTB Group, Russia's two biggest banks, led the decline in Moscow, falling 19 percent and 33 percent respectively. Financial stocks worldwide slid after American International Group Inc., the biggest U.S. insurer, had its credit ratings downgraded. OAO Rosneft, the government-controlled oil producer, lost 20 percent.

The ruble-denominated Micex plunged 17 percent to 890.29 at 4:42 p.m. in Moscow, before trading was suspended, the lowest level in almost three years. That is the biggest drop since Bloomberg started tracking the gauge in May 2001. The dollar- denominated RTS Index lost 12 percent to 1,131.12, giving a 54 percent retreat from its highest close of 2,487.92, on May 19.


The RTS Exchange halted equities trading for the rest of the day. The Micex is due to resume trading at 5:42 p.m. local time.

``It's panic,'' said Oleg Vorotnitsky, head of equity trading at Uralsib Financial Corp. in Moscow. ``There are problems with liquidity on the market. People are having problems with refinancing their positions so they started selling. Concern about AIG in the U.S. is adding to the panic.''

The overnight dollar rate soared 333 basis points to 6.44 percent today, its biggest jump, according to the British Bankers' Association. Rates climbed yesterday after Lehman Brothers Holdings Inc. succumbed to mounting credit-market losses and filed for bankruptcy.

Sberbank sank 19 percent to 36.39 rubles. VTB plunged 33 percent to 3.09 kopeks.

Rosneft Drops

Rosneft, Russia's biggest oil producer, fell 34.01 rubles, or 20 percent, to 135 rubles, the lowest since its IPO in 2006. OAO Novatek, Russia's second-biggest natural-gas producer, sank 17.96 rubles, or 14 percent, to 112.05 rubles.

OAO Gazprom, Russia's biggest corporate borrower, declined 14 percent to 166.99 rubles, less than half its all-time high of 367.54 rubles on May 19.

Crude oil tumbled, dipping below $91 a barrel and taking its two-day decline to more than $10 on concern that turmoil on Wall Street may weaken the global economy and reduce demand.

``For now, we expect the oil price and global financials to dictate moves on the Russian market,'' JPMorgan Chase & Co. strategist Peter Westin in Moscow wrote in a note to investors. ``The outlook for Russian equities today is anything but cheerful.''

To contact the reporter on this story: Bradley Cook in Moscow at bcook7@bloomberg.net.