| LONDON, March 3
LONDON, March 3 Fears of full-fledged
Russia-Ukraine war reverberated across emerging markets on
Monday, with the hardest hit taken by Moscow, where stocks fell
10 percent and the rouble's plunge to record lows led to a
surprise interest rate hike.
Ukrainian assets also fell with the two dollar bonds
maturing in 2014 falling by 6-13 points on fears the
near-bankrupt country would not be able to receive external
assistance in time to avoid default.
Tensions over Russia's moves in Crimea and Ukraine's
characterisation of it as a "declaration of war" rippled across
emerging markets, with MSCI's main equity benchmark falling 1.4
percent and weakening most Asian currencies
The impact was most brutal in Russia, where markets sold off
across the board, with the main stock index posting its
biggest one-day loss since September 2011 and Ukraine-exposed
shares such as Gazprom, VTB and Sberbank losing 10-12 percent on
the day. The rouble slumped 2.5 percent slump at the start of
trade, and the central bank hiked interest rates by 150 basis
points to 7 percent, citing risks to financial stability.
"We are facing a security crisis," said Benoit Anne, head of
emerging equity strategy at Societe Generale.
Central Europe was taking a hit, with the Polish zloty
and the Hungarian forint down around 1
percent to the euro. The Turkish lira fell half a percent
to the dollar.
"You have to watch out for zloty because it is a proxy hedge
for the region and geographically, it's next door," SocGen's
Earlier in Asia, China's yuan stabilised against the dollar
after posting the biggest fall last week in 20 years.
Unicredit said the Russian rate hike was a strong negative
for the economy for which consumption is the primary driver at
present and said it was unlikely to stem rouble depreciation.
The currency is down 10 percent year-to-date.
"Our growth forecast of 2 percent for Russia this year is
too optimistic. Inflation is also likely to remain above target,
bringing into question whether this rate hike will ultimately
In Ukraine, the sovereign bond due June 2014
fell as much as 6 points, according to
Tradeweb, while state energy firm Naftogaz's dollar bond, due in
Sept 2014 fell 13 points.
The hryvnia fell to a new record low of 11.65 per dollar on
the Reuters dealing platform.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )