Russian stocks take biggest tumble since March 2020

Russian stocks tumbled on Tuesday by their most in nearly two years and the rouble came under further selling pressure on mounting fears Moscow may be planning a renewed invasion of Ukraine.

The Moex index fell by 6.5 per cent, taking its losses to about 13 per cent over the past four trading sessions, while Russian government debt continued to slide. The dollar-denominated RTS index fell 7.3 per cent, hitting its lowest level since late 2020.

“We are seeing dislocations in the pricing of rock solid fundamental stocks, as certain western investors are exiting Russia at ‘any price’. The pain looks to continue into the days to come,” said Luis Saenz, head of international distribution at Sinara Financial Corporation.

The rouble fell by 0.9 per cent on Tuesday to 76.7 to the dollar, close to a nine-month low.

Though President Vladimir Putin denies he is planning to attack Ukraine, he has threatened an unspecified “military-technical response” if the west does not meet sweeping Russian security demands.

The US and EU have threatened to impose strong sanctions in response to any attack, which could include moves to cut Russian banks off from the global financial system and restricting the oil and gas exports that provide half of the Kremlin’s budget revenue. Talks in Geneva and Brussels to discuss Russia’s grievances with Nato hit a “dead end” last week.

“I would be surprised if this turns into a full-fledged conflict, but that’s not what the market seems to think,” said Richard House, head of emerging market debt at Allianz Global Investors. “If it does, financial sanctions would follow pretty quickly.”

Shares in giant state-run lender Sberbank, which is often seen as a proxy for the Russian state, fell 8.5 per cent on Tuesday to a three-month low.

The volatility sent yields on Russia’s 10-year rouble-denominated bonds, known as OFZs, to their highest level since early 2016, prompting the finance ministry to cancel a weekly rouble…