By Natsuko Waki
LONDON, March 5 Russian shares fell on
Wednesday, eroding the previous day's gains, and the rouble
teetered near record euro lows as investors remained wary about
the impact of tensions in Crimea on Russia's already struggling
The falls in Russian assets stood in contrast to more stable
developed markets where concern over the Russia-Ukraine
standoff, and possible military action, eased.
China's yuan had its best day since late 2012 as the central
bank allowed the market to reverse part of of its hefty losses
But shares dropped as fears grew over a possible default by
a listed company there and on Beijing's plan to introduce
deposit insurance - a move towards freeing up deposit rates.
The broader benchmark emerging equity index edged higher,
helped by firmer shares in South East Asia.
While the risk of immediate war has eased, Russian forces
remain in control of strategically important Crimea in the Black
Investors are eyeing talks between U.S. Secretary of State
John Kerry and Russian Foreign Minister Sergei Lavrov in Paris
to see if the West would impose sanctions.
"Investors are still nervous and still on the back foot.
(Russian President Vladimir) Putin has left all his options
open," said Thu Lan Nguyen, emerging market strategist at
Commerzbank in Frankfurt.
"Investors are worried about an economic impact if the West
were to decide on economic sanctions."
The rouble-denominated MICEX index was down 1.5
percent while the dollar-denominated RTS lost 1.6
percent. Both indexes plunged as much as 12 percent on Monday.
Russian bank shares fell sharply again, with VTB down more
than 3 percent on the day and Sberbank losing half a percent.
JP Morgan has slashed Russia's economic forecast to just 0.8
percent this year from an earlier 1.8 percent.
"The enhanced drags on Russian growth include a slide in
domestic confidence, reduced capital inflows, and tighter
domestic financial conditions," the bank said in a client note.
The rouble ticked down versus the dollar and euro
, having fallen to record euro lows on Monday.
Russia has relatively little foreign debt but the balance of
payments position is deteriorating because of capital outflows
and falling oil revenues.
The central bank said it had spent the equivalent of $11.4
billion - more than 2 percent of its foreign currency reserves -
on Monday supporting the rouble.
The hryvnia was trading at 9.15 per dollar, having
fallen as low as 11.7 on Monday. Ukraine's sovereign dollar
bonds were stable.
"The market is not expecting an escalation in conflict in
the short term but Kerry is still considering sanctions... so
net net, there is no clear way out of here," said Regis
Chatellier, strategist at Societe Generale.
Kerry has raised the possibility of economic sanctions such
as asset freezes and visa bans on Russian individuals.
Chinese shares fell 0.9 percent while the
yuan rose 0.25 percent against the dollar, having
suffered its biggest weekly drop since 1994 last week.
In what would be the country's first domestic bond default,
loss-making Chinese solar equipment producer Chaori Solar
said it will not be able to meet interest payments
on bonds due on Friday.
The decline in shares follows the yuan's dramatic weakening
last week after the central bank let it fall beyond the official
Many thought the move was designed to set the stage for
further foreign exchange reforms as China began its annual
parliamentary meeting on Wednesday.
"The goal is to liberalise the FX regime and financial
markets but the problem is there's not a lot of transparency,"
Nguyen said. "A lot of people expect the yuan to appreciate but
it is not a one-way street."
The MSCI emerging index rose 0.3 percent.
Qatar's share index fell 2.7 percent after Saudi
Arabia, the United Arab Emirates and Bahrain said they were
withdrawing their ambassadors from Qatar over a security
The index is on track for the biggest one-day fall since
Zambia's kwacha currency fell to a record low of 5.93 per
dollar as China's economic slowdown weighs on demand for
copper. Zambia is a major exporter of the metal.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )