• ACI Russia

08/11/1998 10:24:50 Russian shares tumble early on weak debt markets

By Dmitry Antonov

MOSCOW, Aug 11 (Reuters) - Russian shares fell sharply in

early trade on Tuesday and hovered around their lowest levels in

more than two years as investors took fright from soaring

domestic debt yields and tumbling Asian markets.

"There has been a very substantial drop," said Rinaco Plus

trader Valery Levit, adding that leading shares had touched new

lows on speculative selling. "The situation is extremely grim

for investors, for those who are in stocks and bonds."

At 1015 GMT, Reuters real-time composite index <.RRC1> was

down 11.67 percent at 71.68, while the RTS1-Interfax index

<.IRTS> of leading shares fell 8.38 percent to 110.788, the

lowest since May 1996.

Levit said the more knowing investors had already left the

market. At 1015 GMT, national grid UES <EESR.RTS> slipped to

$0.0880 from $0.1004, LUKoil <LKOH.RTS> fell to $5.00 from $6.24

while Surgutneftegaz <SNGS.RTS> was at $0.0885 from $0.1020.

Dealers said a range of factors was pushing prices down,

including the drops in Russian foreign and domestic debt, a new

slump in oil prices and the continuing crisis on Asian markets.

"The oil price has fallen, our external debt prices are

quite low and the crisis in Asian countries is continuing. This

is the reaction," Aton trader Alexander Bobolev said.

The dealers said it was difficult to predict where the

market would head from here in such thin liquidity.

"We cannot expect a sharp rebound. The market is lacking

liquidity and a sharp drop is possible if there are any further

sell orders," Bobolev said.

However, he said there could be some shortcovering.

"Everything is possible in such an illiquid market," he


Levit said some cautious and selective buying could emerge

at these low levels.

"I would already be buying carefully mid-term or long-term.

At such prices, volatility is completely possible on positive

news and now prices are not bad for those stocks that have hit

new lows," he said.

"Shares are falling strongly and sharply, and it is quite

likely that they can jump on good news," he added.

((Dmitry Antonov, Moscow Newsroom, +7095 941-8520


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