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Russia's Self-Inflicted Equity Crisis

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This post first appeared on Russia Insider

The Russian equity market collapsed a further 2% yesterday.

Not because of sanctions, not because of anything that Brussels or Washington would wish to inflict on Russia. The collapse is a direct result of the egregious muck-up which is the Sistema/Bashneft story -- further intensified as it now appears that Sistema is going to be cut into small pieces and left out to dry. Sistema share have fallen about 80% from the top, and Bashneft is in hot pursuit.

Too bad for the investors.

This suggests a death wish -- not from the standpoint of evil foreign speculators, nasty capitalists and hook-nosed Rothschilds buzzing around in flying saucers piloted by Rockefellers -- but simply given Russia's pressing need to fund economic growth from domestic sources.

It is not just the foreigners who are being chased away -- Russian players are equally adverse to suddenly finding they do not own what they thought they did. It has happened before and it will happen again. Anyone who has invested in the RTS will have his own sad tale to tell.

The equity market is dead; it no longer has a pulse. Anyone remotely switched on abandoned it years ago, and has either moved into the debt markets (which remain quite civilised) or, if they can only trade equities, to a different market. 

Yes, this is fine if one doesn't happen to like capitalist speculators, but it does leave a small problem about how the hell can anyone finance the restructuring and diversifaction of an industrial economy solely on debt finance? And why would they want to?

Is anyone up there even remotely paying attention?

(For the avoidance of doubt: we have zero direct exposure to this story, having almost totally abandoned the Russian equity market some time back…)


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