by Dario Thuburn Thu Sep 18, 4:15 PM ET
MOSCOW (AFP) –on Thursday moved to prop up ‘s battered financial markets following the biggest one-day plunge in share prices since the 1998 financial crisis.
The stock market was suspended for a third day to allow government measures to boost liquidity and calm investor fears that led to Tuesday’s fall. Both main markets were to reopen Friday.
“There is no more important task for Russian authorities than supporting the financial system,” Medvedev told ministers at an emergency meeting on economic policy in the Kremlin that was broadcast on national television.
“We have enough reserves, we have a strong economy and this is a guarantee that there will not be any shocks… The market will get all the necessary support,” he said, adding that the government was “ready to act quickly.”
Finance Minister Alexei Kudrin told the meeting that would resume on Friday and outlined rescue measures including the injection of 10 billion euros (14.3 billion dollars) into the market on Thursday.
Kudrin announced a cut in oil export duties to 372 dollars a tonne from 495.9 dollars as of October 1, a multi-billion dollar injection to ease the pain of recent falls in the— the mainstay of Russia’s recent economic boom.
Medvedev also said the government would supply around 13.7 billion euros (19.7 billion dollars) to support the financial markets, half of which would come from the budget, and promised possible “additional measures.”
“The situation is such that share prices, including those of large, reputable companies, and those with state involvement, have fallen to levels which do not correspond, in our view, with their real value,” Kudrin said.
“If this under-valuation of the companies exists for a long time, the government may buy some of these shares — both in state-linked and private firms” listed on the market, he added.
The government is ready to spend “billion rubles (6.9 billion euros) to begin with,” and if that is not enough, it will spend “another 250 billion rubles,” he said.
All fundamental indexes of the Russian economy are “normal”, Interfax news agency meanwhile quoted Prime Minister Vladimir Putin as telling foreign business leaders.
The current oil price was offering Russia a cushion, he said, adding that revenues from Russian gas and oil exports could be used in the future to prop up a failing market.
“I don’t think that time has come to spend the income from gas and oil. But if necessary, we can use it to back up the financial market,” he said.
Putin also said that Russia would not close its market to foreign investors, Interfax reported.
Officials earlier pledged to inject 44 billion dollars (31 billion euros) into the market to fight collapsing investor confidence and the central bank said it was slashing reserve requirements for banks by four percent.
The measures “will be sufficient to recover the pre-crisis functioning of the money market and will strongly contribute to restoring the overall degree of confidence,” the Renaissance Capital investment bank said in a statement.
The RTS plunged 11.47 percent and the MICEX 17.45 percent on Tuesday in the worst day of trading since the financial crisis of 1998, which led to exploding inflation, the collapse of several major banks and political turmoil.
The RTS has now lost 57 percent since hitting an all-time high in May, a slump analysts put down to a mix of falling energy prices, global market turmoil and political issues including worries over the war with Georgia.
“Who are we waiting for? Don’t you understand that you’ve all lost your jobs?” read a comment left on Thursday on a specialist Russian Internet forum used by traders, quote.ru.
Analysts said that while the Russian economy was in far better shape now than in 1998, the current crisis could lead to the collapse of some banks and could lead ordinary Russians to rush to withdraw their deposits.
Meanwhile the Central Bank on Thursday said that Russia’s international reserves had lost 13.3 billion dollars, going down from 573.6 billion dollars on September 5 to 560.3 billion dollars on September 12.