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08/11/1998 11:14:18 FOCUS-Russia markets take beating, confidence weak

By Patrick Lannin

MOSCOW, Aug 11 (Reuters) - Russian debt and shares took a

fresh beating on Tuesday, with investors sceptical over the

government's chances of pulling the country back from financial

crisis.

Russian T-bill yields soared to 115-130 percent for long-

and medium-term paper from around 95-100 percent on Monday,

while the leading bourse index slid to levels not seen since May

1996. Oil shares were hit hard as world oil markets slumped.

Dealers and analysts said the spike in yields and slide in

prices took place in thin trade, suggesting a general lack of

confidence and willingness to support the market rather than a

mass panic selloff.

The key to the confidence crisis was worries that Prime

Minister Sergei Kiriyenko's rescue package would not be able to

pull off the awesome task of saving Russia from financial ruin

and a possible rouble devaluation, they said.

A $22.6-billion bailout led by the International Monetary

Fund (IMF) may be in the bag, but investors needed to see

concrete results from Kiriyenko, they added.

"It (the IMF package) was breathing space, it gives Russia

three to four months to get its act together and redress the

fiscal imbalance," said Alfa Bank chief economist Thierry

Malleret.

"Now there are fundamental worries about the Russian

government's ability to do that compounded with the situation in

emerging markets at large," he said.

"Both external and internal factors are playing against

Russia," Malleret said.

The backdrop is currency and share turbulence the world

over, a big disincentive to put funds into Russia's emerging

markets, analysts said.

Russian GKO treasury bill yields have taken the brunt of

investor worries, pushing up at one point during Tuesday's trade

to 130-137 percent for 1999 maturities.

Shares also suffered, although again volumes were low, with

the benchmark RTS1-Interfax share index <.IRTS> down 9.45

percent at 109.48, a level not seen since May 1996.

Leading shares took the index down, with electricity grid

UES <EESR.RTS> trading at $0.0885, a 11.9 percent fall from

Monday's $0.1004 close while oil firm LUKOil <LKOH.RTS> was down

19.9 percent at $5.00 versus $6.24.

Tom Adshead, head of equity research at United Financial

Group, said some investors were interested in buying but that

this was quashed by an overall sense that the market had some

way to go before reaching its lowest levels.

"Noone really knows where the market ought to be," said

Adshead, adding that the bourse may bottom out around October.

"People want a feeling that the government is coming around

and achieving what it said it was going to do," he said.

Russia's dollar debt, traded as PRINs <RUSPRIN=RR>, also

slid to fresh lows, quoted at 26.625 versus 32-1/8 Monday.

The rouble also traded outside the mini-band set by the

central bank at 6.2360/6.2940. The spot rouble was quoted at

6.3010/6.3040.

((Moscow newsroom +7095 941 8520,

moscow.newsroom@reuters.com))

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