The landslide was triggered by the assumption that the U.S. economy is, or may be, about to plunge into recession, which would inevitably affect the global economy. In practice, however, the current status and prospects of Russia's non-financial sectors have not changed an inch. With the exception of the United States, the world's other leading economies are also feeling quite well.
A stock market crisis has long been in the wind. The first signs occurred late last summer, with the outbreak of the U.S. subprime mortgage crisis. The losses subsequently sustained by major global banks, most of which are headquartered in the United States, are estimated at $400bn. This has certainly affected the American economy, and could easily be followed by a long period of stagnation or even recession. American companies will become less attractive to investors and banks, hit hard by the mortgage crisis, will have to reduce their acquisitions of stocks.
For some reason, however, many of the world's investors chose last week to begin mass selling of stocks in anticipation of the worst-case scenario - an American slowdown turning into worldwide recession. Since the same major market players operate on all of the world's stock exchanges, a tremendous meltdown began in all markets simultaneously.
Ironically though, it was Monday the 21st, a bank holiday in the United States, that the crisis eventually took shape. While the American markets enjoyed a day off, Asian stock markets plummeted by an average of 5%, while the European Dow Jones Stoxx 600 index fell by 5.7%. The Russian stock market lived through yet another "black Monday" and "outmatched" the rest of the world by sinking even lower, by more than 7%.
The landslide continued through Tuesday. Asian indices lost another 7%, the Dow Jones had fallen 3.7% by midday, and the Russian RTS by 1.5%. Everyone held their breath, horrified, as they waited for the New York Stock Exchange to reopen at 5-00 pm Moscow time.
With such gloomy sentiments so universally predominant among investors, it is very difficult to tell how deep the fall will be and how long it will continue. They are currently calculating their quotations based on the worst of possible scenarios: a slump in the U.S. economy causing slowdowns in all the major world economies and inflicting huge losses on large companies.
But this dark forecast sounds strangely disconnected from the current situation in certain major economies. For instance, the stocks of Russia's leading oil companies, LUKoil and Surgutneftegaz, have hit their lows in the past 18 to 24 months - and that is with the price of oil at $88 per barrel, up 80% on last year. Industrial metals prices are also stable. Since metals are Russia's second most important export products, the inflow of cash from exports is unlikely to subside. That, in turn, implies that Russians' incomes will remain stable, too - which encourages growth in other economic sectors.
"Will Russians eat less, stop driving their cars or using their cell-phones? Hardly. Then why are leading Russian stocks falling? None of our major companies have bought U.S. mortgage bonds," said Alexander Potavin, an analyst with the AntantaPioglobal Investment Group.
Still, he admits, investors are right not to buy anything on the Russian stock market these days, for simple financial reasons. It is pointless to buy stocks in the middle of a fall just because they are cheaper: they are bound to sink still lower.
Former head of the Federal Financial Markets Service Oleg Vyugin, who is probably the most authoritative expert on the Russian stock market, agrees. "There is no end in sight," he told RIA Novosti, adding that the current instability on global stock markets could last till the end of this year, because of the deep conviction amongst investors of the grim prospects facing the U.S. economy.
Vyugin advises those Russians who took part in the "popular" IPOs of Rosneft, Sberbank and VTB in 2006 and 2007 to avoid joining the panic. Selling assets in the current situation would only lead to greater losses.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
