A pedestrian passes a display of dollar, euro, sterling and yen exchange rates outside a foreign currency exchange bureau in Moscow, Russia. (Photographer: Andrey Rudakov/Bloomberg)

Russian Stocks Take Worst Hit Since Crimea on Sanctions, Syria

(Bloomberg) -- Russian stocks had their biggest drop in four years and the ruble slumped the most in the world after the U.S. slapped new sanctions on Kremlin-connected billionaires and tensions with the U.S. spiraled following the latest chemical attack in Syria.

The benchmark MOEX Russia Index sank 8.7 percent on Monday, the steepest slide since March 2014, when Moscow’s annexation of the Crimean peninsula triggered international penalties. The ruble and local bonds had their biggest drop since 2016 and the cost of insuring sovereign notes against default was set for the sharpest increase since December 2014.

Russian Stocks Take Worst Hit Since Crimea on Sanctions, Syria

Investors pulled out after the U.S. on Friday escalated penalties against Russia for meddling in the 2016 election by sanctioning dozens of Russian tycoons, companies and key allies of President Vladimir Putin. On top of that, U.S. President Donald Trump warned of a “big price to pay” in response to reports of a chemical attack outside Syria’s capital, saying President Vladimir Putin and Iran “are responsible for backing Animal Assad.”

“We haven’t seen such a united, mass retreat from Russian assets for a long time,” Kirill Tremasov, director of the analysis department at Loko-Invest said by phone. “The situation is ever more reminiscent of 2014.”

Market Snapshot

  • The ruble tumbled 3.3 percent to 60.1625 against the dollar by 4:34 p.m. in Moscow, set for a a three-day 4.5 percent fall
  • VTB Bank PJSC slumped as much as 12 percent after its Chairman Andrey Kostin was included in the U.S. sanctions list; Polyus PJSC declined more than 23 percent after Suleiman Kerimov, whose son controls Polyus, was also sanctioned
  • Russian five-year credit-default swaps climbed 15 basis points, or 12 percent, on Monday
  • 10-year ruble bonds fell for a second day, lifting the yield 21 basis points to 7.28 percent, the highest since January, as trading volumes surged
  • The United Kingdom’s Financial Conduct Authority on Monday suspended trading of En+ shares

President Donald Trump’s move on Friday adds to a succession of actions by the U.S. and its allies in recent weeks over the poisoning of an ex-spy in Britain. The Russian government was racing to come up with measures to assist tycoons hit by the latest penalties, according to a senior official involved in the process.

‘Had Enough’

Shares plunged in Oleg Deripaska’s aluminum giant, United Co. Rusal, and holding company En+ Group Plc, which were both sanctioned along with their billionaire owner. Tycoon Viktor Vekselberg was also subject to penalties.

“Investors finally realized how badly things are turning out for Russia,” said Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow, who’s selling Russian shares today. “It seems like the U.S. has had enough. Foreign investors have to exit sanctioned companies, but they saw this order as a signal to exit all Russian stocks. Investors are afraid that now any Russian company is at risk of sanctions. Traders are closing limits on Russian shares because they’re seen as toxic assets.”

©2018 Bloomberg L.P.