Friday, July 25, 2008

Russian Stock Market Plunging

Looks like that Mechel (MTL) "tiff" along with a few other things are causing some major selloffs in Russia. So let me get this right; when a government gets all socialistic .... the stock market reacts poorly. Hmm... that would explain a lot of things over the past year.

Before I post the story I just wanted to post this one sentence I read last evening that sent chills through me, sitting thousands of miles away. I was going to title this post "Phrases you never want Putin to say about you"

Such as...
(CEO) Zyuzin, who was invited to attend the meeting, ``has suddenly fallen ill,'' Putin said. He urged Zyuzin to get well soon, ``otherwise, we'll need to send him a doctor and clean up all these problems.''

Ok maybe I am reading too much into that but have I mentioned we live in interesting times?
  • Investors piled out of Russian stocks Friday after the abrupt departure from the country of a foreign oil boss and the prime minister's unexpected severe criticism of a large steel firm.
  • MICEX, the exchange where the bulk of trading in Russian stocks takes place, plunged 5.5 percent by the close of markets, while the RTS Index lost 5.6 percent to sink to its lowest point since March.
  • After Prime Minister Vladimir Putin's scathing attack on Mechel late Thursday, heavy trading in New York sent the steel and coal maker's stock down nearly 40 percent, wiping more than $5 billion off its value -- though shares rose around 20 percent in early trading in New York on Friday.
  • Earlier Thursday Robert Dudley, CEO of the embattled Anglo-Russian oil producer TNK-BP, left the country three days before his visa was due to expire. Russia has not renewed the visa on the grounds that he allegedly does not have a valid work contract. Dudley, who said in a statement his departure follows a sustained assault on the company in the past several months, vowed to run the company from abroad.
  • The developments rattled investors, leading to a heavy sell-off in Russian equity, which is dominated by oil stocks.
  • "Sentiment is moving against Russia," said James Fenkner, managing partner at Red Star Asset Management in Moscow. "If oil has any kind of bounce, the market will look kindly on Russia. If oil (prices) begin to slip, there will be a great unwind."
  • Observers say soaring oil prices have largely masked the political tensions bubbling beneath the surface, and investors are tensely watching how the corporate conflict plays out at TNK-BP, widely seen as a test case for foreign investment under new President Dmitry Medvedev.
  • While the TNK-BP dispute has spooked investors, observers were skeptical that the onslaught on Mechel heralded a politically motivated attack of the type that brought Yukos oil company to its knees and caused lasting harm to Russia's investment image.
  • "I think the probability of this becoming a Yukos-style asset grab is relatively small," said Red Star's Fenkner. "But if it's an asset distribution, then all bets are off."
  • In a research note, Chris Weafer, chief strategist at UralSib, said, "The last train carrying the optimists out of Russian equities has just left the station. Let's hope it's just for a vacation rather than emigration."
Well we've lost the I and C of BRIC, and now it appears we are losing the R. Everyone to Brazil!

Oops, wait crude might be heading to $100 so Brazil's stock market should sell off somewhere in the 80-99.9% range due to that. Hedge funds say so. Got it.

We've lost 'em all folks. I knew this was a ploy to get the US stock market up one way or the other. (eliminate all other choices one by one)

I need to fix my hedge fund thesis to this: crude oil = potash = iron ore = Russia = coal = wheat = Brazil = nickel = corn = coffee = natural gas. It's all one trade! It's all good! Or all bad! Ah, who knew these guys were paid the huge bucks for 2nd grade logic.

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