Crimea Fuels Lehman-Like Volatility Surge in Russia’s RTS

Russian stocks are posting the biggest swings since the collapse of Lehman Brothers Holdings Inc. as President Vladimir Putin ignores the West’s calls for him to drop plans to take the Crimea peninsula from Ukraine.

The RTS Volatility Index, which measures expected swings in the stock-index futures, has more than doubled this year, the most on a quarterly basis since 2008, when Lehman’s bankruptcy spurred a rout across global markets. The Micex Index fell 1.3 percent in Moscow yesterday while the Bloomberg index of the most-traded Russian equities in the U.S. dropped 0.7 percent, extending this year’s slide to 19 percent.

Putin’s move to annex Crimea following the ouster of his ally, Viktor Yanukovych, from the Ukrainian presidency last month has pushed Russia and the West into their worst crisis since the end of the Cold War. Ukraine said it would pull its military out of Crimea and fortify its eastern border with Russia as European leaders struggled to come up with a unified response to punish Putin.

“Volatility increases as uncertainty rises,” Aleksei Belkin, who helps manage about $4 billion in assets as chief investment officer at Kapital Asset Management LLC in Moscow, said by phone yesterday. “The market doesn’t like confrontation and it’s being driven by news on the development of the political conflict these days.”

The Ukrainian crisis prompted the European Union and the U.S. to impose sanctions against Russia, whose economy started to slow even before the standoff with the West. Russia’s gross domestic product expanded 1.3 percent last year after 3.4 percent growth in 2012.

Road Map

It is unclear whether EU leaders will agree on a road map for economic sanctions at a two-day summit starting today in Brussels, six EU officials told reporters yesterday. A less controversial option would be to expand an existing blacklist of 21 Russian and Crimean officials, they said.

The RTS volatility gauge rose fourfold in the third quarter of 2008, after Lehman filed the largest bankruptcy in U.S. history in September of that year. The collapse of the bank had spurred a global credit crunch and economic slump.

Federal Reserve Chair Janet Yellen said yesterday the central bank is monitoring the crisis in Ukraine and so far doesn’t see significant fallout for the global financial system. The Fed also said its stimulus program could end this fall and benchmark interest rates could rise six months later.

The Bloomberg Russia-US Equity index fell to 82.84 yesterday. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund tracking the nation’s biggest companies, sank 3.5 percent to $22.68. The RTS Volatility gauge rose 2.1 percent to 47.20, while RTS index futures declined 1.3 percent to 111,030 in U.S. hours.

Rostelecom Slides

American depositary receipts of OAO Rostelecom declined 4.7 percent to $14.45. CTC Media Inc. sank 2.9 percent to $9.14 in New York, extending this year’s slide to 34 percent. OAO Sberbank, Russia’s biggest lender, decreased 1.4 percent to $9.14, falling 27 percent this year.

The ruble is the worst performer this year after the Argentine peso among 24 emerging-market currencies tracked by Bloomberg, depreciating 8.6 percent against the dollar.

Before it's here, it's on the Bloomberg Terminal.