By Carolyn Cohn
LONDON, March 6 (Reuters) - Ukrainian and Russian assets fell on Thursday after Crimea’s parliament voted to join Russia and the United States ordered sanctions on those involved in undermining democracy in the region.
Crimea’s Moscow-backed government said a referendum on the region’s status would take place on March 16, in a dramatic escalation of the crisis over the Ukrainian Black Sea peninsula.
European Union leaders are holding an emergency summit on Thursday to seek ways to pressure Russia to back down and accept mediation.
“Markets are still very sensitive to Russia/Ukraine related headlines,” said Luis Costa, emerging markets strategist at Citi, in a client note.
“It looks pretty clear to me the referendum’s outcome will be a glaring ‘yes’ to join Russia.”
An executive order from President Barack Obama allows the United States to sanction those most directly involved in destabilising Ukraine, including Crimea, the White House said.
Ratings agency Moody’s said the Russia-Ukraine situation was credit-negative for Russia and the possibility of sanctions could damage exports and growth.
“Any secondary effect (on Russia) of the escalation in tensions will be financial,” said Joseph Dayan, managing director of brokerage BCS Financial Group.
“Sanctions are the key concern.”
Ukrainian five-year credit default swaps rose 47 basis points from Wednesday’s close to 1,093 bps, according to Markit.
Ukraine and state energy firm Naftogaz’ dollar bonds due later this year fell more than 2 cents on the dollar, with longer-dated bonds down around 1 cent.
Ukrainian debt is under pressure after Finance Minister Oleksander Shlapak said on Wednesday that Ukraine could start talks with creditors on restructuring foreign currency debt.
But a Ukrainian Finance Ministry official told bankers on Thursday that the government intended to honour its foreign and domestic debt obligations.
Russian stocks fell 2.5-3 percent and the rouble weakened against the dollar. Russia’s dollar bond due 2043 fell 1 point.
Emerging stocks remained 0.75 percent higher, however, approaching six-week highs, helped by a rise in Chinese stocks, the largest component of the index. Some analysts say emerging stocks are starting to look cheap.
The forint, which has suffered from contagion from the Russia-Ukraine crisis, eased from earlier 2-1/2 week highs, though the rand clung to two-month peaks. The Turkish lira was also proving resilient to a corruption scandal touching the government.
Jitters have moved on from more mainstream emerging markets to frontier African economies.
The Zambian kwacha hit a record low for a second day after the central bank said on Wednesday it would not intervene to halt the slide in the currency of Africa’s top copper producer.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )