Russian stocks slid the most in more than five years after President Vladimir Putin ordered the deployment of troops to Crimea, spurring prospects of sanctions against the country.
The benchmark Micex Index of equities tumbled 11 percent to 1,288.81 by the close in Moscow, their biggest loss since November 2008. The dollar-denominated RTS Index slumped 12 percent to 1,115.21, entering a bear market. OAO Gazprom, the gas-export monopoly, lost 14 percent to 121.04 rubles, while OAO Sberbank, the nation’s biggest lender, retreated 15 percent to 77.35 rubles. Miner OAO Mechel plunged 23 percent to 31.2 rubles.
Ukraine warned that Putin’s military is strengthening its presence in Crimea as it mobilized the army and called for foreign observers amid the worst standoff between the East and West since the Cold War ended. U.S. Secretary of State John Kerry is traveling to Kiev after discussing sanctions against Russia, while Bank Rossi unexpectedly raised rates as the ruble sank to a record.
“It’s bad news all around, with Russian and Ukrainian assets to suffer as a result and possibly also global markets, as this is now a global crisis situation,” Tim Ash, chief emerging-markets economist at Standard Bank Group Ltd. in London, wrote in e-mailed comments.
Russia’s central bank central bank raised its benchmark seven-day interest rate to 7 percent from 5.5 percent, saying it’s a temporary increase aimed at preventing inflation and ensuring financial stability.
The ruble weakened to an all-time low versus the central bank’s target basket of dollars and euros. The extra yield investors demand to own the country’s debt rather than U.S. Treasuries jumped 21 basis points to 266, according to JPMorgan Chase & Co. indexes.
“Russia serves as a proxy for playing a fraught situation in Ukraine, with equity and fixed-income markets coming under sever market pressure,” Ivan Tchakarov, chief Russia economist at Citigroup Inc., said in e-mailed comments.
Ukrainian Premier Arseniy Yatsenyuk yesterday urged Putin to pull back his military forces, warning that the two nations were “on the brink of disaster.” He reiterated calls today for a political solution.
Putin won approval from lawmakers on March 1 to deploy troops in Ukraine. Russian-speaking forces subsequently arrived outside the Ukrainian infantry base at Privolnoye on the Crimean peninsula. Gunmen seized control of government buildings and airports in Crimea, where the majority of people speak Russian, at the end of last week. Crimea’s parliament agreed on Feb. 27 to hold a referendum on the territorial status of the region.
The RTS extended declines from its peak on Oct. 22 to 27 percent, exceeding the 20 percent threshold for a bear market. The Micex has dropped 16 percent from its October high.
Russia’s equities have the cheapest valuations among 21 developing countries monitored by Bloomberg, with shares on the Micex trading at 4.7 times projected 12-month earnings, compared with a multiple of 10.1 for the MSCI Emerging Markets Index.