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Thursday, 27 February 2014
Russia Stocks Sink With Ruble Amid Military Tests Near Ukraine
By Ksenia GalouchkoFeb 27, 2014 1:35 AM PT
The ruble weakened to a record and Russian stocks slumped to a three-week low after Russialaunched military exercises amid deepening tensions in Ukraine.
The currency depreciated 0.2 percent to 42.0944 against Bank Rossii’s target basket of dollars and euros by 1:16 p.m. in Moscow. The benchmark Micex stock index decreased 1 percent to 1,455.20, the lowest level since Feb. 5, after a 0.5 percent gain earlier and taking a three-day decline to 2.4 percent.
Russia is conducting a check of the combat-readiness of central and western military districts as well as a test of air defense, airborne troops and aviation, according to a statement on the Defense Ministry’s website. Tensions flared in the southern Ukrainian region of Crimea as an armed group occupied parliament and government buildings in the capital of the region, replacing the Ukrainian flag with Russia’s tricolor.
“The market is really afraid because it doesn’t understand what’s going on,” Vadim Bit-Avragim, who helps oversee about $4.2 billion at Kapital Asset Management in Moscow, said by phone today. “All investors are pricing in the possibility of Russia’s military intervention in Ukraine.”
The ruble and stocks extended declines as Interfax reported Russia’s fighter jets had been placed on combat alert near the western border, citing the Defense Ministry.
Ukraine’s interim government is seeking to secure as much as $35 billion in financial aid to fend off a possible default after the ouster of Viktor Yanukovych from the presidency last week. More than 80 protesters and police officers have died in the riots.
The ruble depreciated 0.5 percent to 36.1950 per dollar and weakened 0.3 percent to 49.4085 against the euro. The currency has dropped 9.2 percent against the greenback this year, the second-worst performance among 24 emerging-market currencies tracked by Bloomberg, as Federal Reserve stimulus cuts curbed investor appetite for developing-nation currencies.
Russia’s equities have the cheapest valuations among 21 developing countries monitored by Bloomberg, with shares on the Micex trading at 5.3 times projected 12-month earnings, compared with a multiple of 10.2 for the MSCI Emerging Markets Index.