• ACI Russia

08/07/1998 10:56:06 Russian shares tumble early on foreign selling

By Olga Popova

MOSCOW, Aug 7 (Reuters) - Russian shares tumbled more than

five percent in early trade, wiping out what was left of the

fragile recovery that followed last month's agreement on a new

international credit package, dealers said.

Reuters real-time composite index <.RRC1> was down 5.38

percent at 88.17 by 1050 GMT. The RTS1-Interfax index <.IRTS>

was down 4.04 percent at 130.39 after hitting a new low for the

year and the lowest levels in more than two years.

"We have probably already reached those levels to which we

fell the last time (in July)," ING Barings trader Oleg Galkin

said. "There are absolutely no buyers."

Russian market sentiment was damaged by falls in Hong Kong

and Tokyo amid fears over the stability of China's yuan, and by

higher yields on domestic treasury bills.

"The West is no the main impetus behind the fall," Galkin


Russian GKO t-bill and OFZ bond yields jumped to 90-95

percent annual in thin trading, compared with 78-82 percent on

Thursday following the central bank's announcement that it would

auction six billion roubles of new paper next week.

"There isn't much money and, with the announcement of

unpopular auctions, people are nervous," said Rossiisky Kredit

trader Konstantin Svyatny.

"Besides, the news about our foreign debt does not inspire

optimism," he said, referring to a drop to record lows of

Russia's dollar-denominated debt on international markets.

Svyatny said the most active sales of domestic debt were for

paper maturing in November.

The finance ministry is due to auction three billion roubles

of GFO paper -- a new type of bearer bond aimed at private

retail investors -- and three billion roubles of fixed-rate OFZ

bonds on Wednesday.

On the stock market, shares in bellwether national

electricity firm UES <EESR.RTS> dropped to $0.1100 at 1050 GMT

from $0.1150 at Thursday's close.

Surgutneftegaz <SNGS.RTS>, touted by many analysts as one of

the most promising oil company stocks, slipped to $0.1075 from

$0.1115, while LUKoil <LKOH.RTS> fell to $7.05 from $7.49.

"In my view, the main reason is the same as before in that

banks are afraid of a devaluation," said Andrei Galperin, head

of the domestic investors' department at Rinaco Plus.

"It is clear that the world markets are now looking

downwards...people are afraid of holding roubles," he added.

However, Galkin said it was possible that the fall in share

prices would halt by the time the New York market opens.

"At these levels, you cannot sell a lot. The liquidity of

the market is falling. Therefore, perhaps we shall see a brief

bounce, then stabilisation until New York comes in," he said.

((Moscow Newsroom, +7095 941-8520 moscow.newsroom@reuters.com))


Reuters Russian Composite <.RRC>

Reuters Russian Composite (excluding MSE) <.RRC1>

Reuters Russian RTS (rouble-based) <.RRTS>

Reuters Russian RTS (dollar-based) <.RRTSU>

Reuters Russian MICEX <.RMM>

Reuters Russian MSE <.RMOS>

Reuters Russian SPICEX <.RPCX>

Reuters Russian St Petersburg <.RPEX>

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