September 16, 2008 / 1:31 PM / 10 years ago

UPDATE 1-Russian stocks suspended in worst plunge since 1998

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MOSCOW, Sept 16 (Reuters) - Russia’s most liquid stock exchange MICEX suspended trade on Tuesday after the worst one-day fall in 10 years as Finance Minister Alexei Kudrin reassured markets there was no “systemic” crisis.

Share trade on MICEX .MCX was suspended for one hour starting at 4:42 p.m. (1242 GMT) because of steep falls driven by liquidity fears, an exchange official said.

The index was down 16.6 percent at 890.29 having fallen as low as 889.66 — its biggest percentage loss since the Russian financial crisis of 1998.

Trading was also suspended for one hour in the dollar-denominated RTS index .IRTS.

State bank VTB (VTBR.MM) shares were down 32.5 percent when trade was suspended, while state savings bank Sberbank SBER03.MM, one of the biggest index components, was down 20.9 percent.

“There are risks in our system and when there are more shocks from the global crisis, there are more risks in Russia, but they do not have an extraordinary, systemic nature,” Kudrin was quoted as saying by Interfax news agency.

Traders and investors, their positions already slashed by heavy margin calls, were retreating into cash, market participants said.

“It’s people moving into cash and ... getting worried about who they are dealing with,” a Moscow-based trader at a Western bank said.

Analysts and investors are hoping Russia’s relatively unleveraged economy will weather a major shakeout in global banking, but Russia’s stock markets, largely driven by short-term liquidity, have been savaged.

“It is pretty shocking,” said Lars Christensen, chief analyst and head of emerging markets research at Danske Bank.

“This is the result of the nasty cocktail of (the) credit crunch, falling oil prices and geo-political risk. It seems like investors very fast are loosing confidence in the Russian economy (and) it is hard to see any recovery in the markets as long as these three factors are in focus.”

Finance Minister Kudrin declined to comment on the possiblity of state support measures for Russia’s banks. (Reporting by Olga Popova, Toni Vorobyova and Melissa Akin; Writing by Melissa Akin; Editing by David Holmes)

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