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Russian Stock Markets Collapse

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Russia's two primary investment trading exchanged crashed closed Wednesday despite massive efforts by the Russian government to keep those exchanges afloat.

The Russian markets were reacting in large measure to the global credit crisis now gripping stock and investment markets around the world. On Wednesday, September 17, the Russian markets announced that they were suspending stock trading until further notice from the state's main financial regulator. On Thursday, the RTS exchange resumed trading commodities futures contracts for goods, currency and interest rates but not for equities. On Friday, the stock markets were allowed to re-open but trading was repeatedly suspended in buying stampedes.

The closure followed two days of tumultuous trading in which the exchange trading locked up with lots of sellers but no buyers. Government and Russian central bankers were closted behind closed doors with the CEO's of Russia's biggest investment banks. Prime Minister Vladimir Putin and President Dmitry Medvedev met with top advisors to discuss ways to ease the crisis of confidence and restore liquidity to the Russian markets to stave off a spill over into the everyday economy that affects its citizens. Rumors swirled around Moscow that one bank was failing to make payments to counterparties.

Russian leaders are concerned that consumer confidence will abandon traditional banking and resort to keeping their savings in mattresses and stop spending. As a result, Russian leaders were working on ways to implement some sort of bail-out plan for KIT Finance which confirmed that it had failed to meet several obligations. The investment brokerage firm revealed Wednesday evening that the company was negotiating with another asset management company owned by close associates of Prime Minister Putin. According to published reports, on mid-sized commercial bank began defaulting on payment obligations Wednesday morning, which caused the government to halt trading on the stock exchanges after a panic set in.

The Russian Finance Ministry pledged to pump a further $60 billion dollars into short-term deposits in three main state-controlled banks, but similar, prior injections had failed to work their way into the broader system as interbank lending froze. Similar problems have been noted in European and American banking systems also, but not to quite the extent as in the Russian system. For more on the Russian financial crisis - LINK HERE. To catch information on Friday's interruptions, LINK HERE.

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