April 10, 2018
Russian stocks suffered their worst session in four years and the country’s bonds and currency plunged as the impact of new US sanctions against its economy and fears over increased conflict in Syria ravaged markets. The Kremlin was left scrambling on Monday to find ways to support its companies and retaliate against Washington as the stock market sell-off spread far beyond the seven oligarchs and 14 companies hit by US sanctions late last week. Investors worried about increased geopolitical risk bailed out of Russia-linked assets, sending Moscow’s blue-chip MOEX index down 8.34 per cent, its biggest single-day fall since the imposition of sanctions by the west in 2014 in response to Moscow’s invasion of Crimea. The rouble fell as much as 4.1 per cent against the dollar, its largest drop since 2016. “Essentially, geopolitical risk has increased with the rouble the main casualty so far as Russia was strongly criticised for supporting Syrian President [Bashar al] Assad,” said Piotr Matys at Rabobank.
Russia came under further pressure over the weekend as Donald Trump led international condemnation of an alleged chemical weapons attack by the Syrian government. The US president warned there would be a “big price to pay” for the Syrian regime and its Russian and Iranian backers if reports of the alleged chemical attack were confirmed.*Companies owned by Russian billionaire Oleg Deripaska were the biggest casualties of Monday’s sell-off. Mr Deripaska and his entire business empire were hit by sanctions on Friday, and he warned of “materially adverse impacts” on future business prospects and potential technical credit defaults.*Investors wiped off half the value of his Hong Kong-listed aluminium producer Rusal and almost a third from his London-listed holding company EN+ in reaction to the sanctions.*Companies not affected by the US action were also hit hard, with Russia’s largest lender Sberbank down 17 per cent and miner Norilsk Nickel off 15 per cent. Igor Ojereliev, founder of RGL Capital in London, said the sell-off — though not extreme by emerging markets standards — had revealed wider risks emanating from the sanctions, stretching from customers and suppliers to counter-parties and portfolio investors. “You do not necessarily need to be on the sanctions list to be almost directly affected,” Mr Ojereliev said, noting that many affluent Russians in London still held investments in Russia.
