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SectionsJanuary 5 2009

Mattias Westman

Lowered oil prices and political fear have rocked the balance of Russia’s economy, but there is still some cause for optimism.
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The intensification of the global credit crunch in autumn put emerging markets under serious pressure – as Western money sought safe havens during a concerted ‘rush from risk’. The MSCI Emerging Markets index was down by 60% during the year up to mid-December. But the RTS index of leading Russian shares fell even more dramatically – by 70% during the same period.

Until June, and almost uniquely in the world, the RTS was up for the year-to-date – despite the credit crunch. As the Western world suffered, the Kremlin boasted that Russia was an “island of stability”. But then lower oil prices and political fears undermined Russian shares. That sparked a wave of margin calls – turning leveraged investors into forced sellers and causing the market to spiral, wiping out $1000bn of value between August and October.

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