Russia’s RTS stock index is turning into the world’s worst performer this quarter as tumbling oil, a war in Georgia and the probe of a steel company remind investors that owning shares in the former communist nation can be perilous.
The RTS has fallen 22 percent since June 30, even after Russian President Dmitry Medvedev halted the invasion of Georgia on Tuesday, sending the index up 3.5 percent. The retreat this quarter is the steepest among indexes in the world’s 20 biggest stock markets, data compiled by Bloomberg showed.
While the slump pushed valuations of the 48 companies in the index to the lowest level since March 2006, Firebird Management LLC, Credit Suisse Group’s Clariden Leu and Banco Santander SA are avoiding the country. The government’s investigation of steel producer OAO Mechel comes five years after the state’s assault on OAO Yukos Oil Co, while its decision to send tanks into Georgia shook confidence in Medvedev.
“This bounce should be sold,” said Ian Hague, the New York-based founding partner of Firebird, who reduced Russian stock holdings in the past three months to less than half of the US$1.8 billion he had invested in countries that made up the former Soviet Union.
“Russia will be a pariah. It is a pariah. It’s difficult to do anything other than reduce your exposure,” Hague said on Tuesday after returning from Tbilisi, the Georgian capital.
Russia promised to pull troops from Georgia after Medvedev ordered an end to a five-day incursion in the former Soviet republic. The conflict was Russia’s first major foreign offensive since the collapse of the Soviet Union in 1991 and strained relations with the US, as US President George W. Bush said the action would have “serious consequences” if it continued.
The RTS Index fell 2.1 percent since the invasion began on Aug. 8 and closed at 1803.82 on Tuesday, 27 percent below its record high of 2,487.92 in May.
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