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Tuesday, August 10, 1999 Published at 16:47 GMT 17:47 UK

Business: The Economy

Russian market bounces back

The rouble's fall sent people rushing to exchange money

Russian shares shook off the political turmoil of this week to regain some stability on Tuesday.

The news that President Yeltsin had sacked Prime Minister Sergei Stepashin initially sent stocks tumbling.

But they gradually recovered, and on Tuesday the main RTS1-Interfax index finished up 0.7% at 102.42, not far off Friday's close.

In fact shares moved well ahead in early trade, which analysts put down to expectations of continuity in economic policies under Acting Prime Minister Vladimir Putin.

Rouble recovered losses

An economist at MFK Renaissance, Dmitri Kuliashenets, said: "The situation is stabilising because the markets do not expect any more upheaval. The Duma has signalled that the candidacy of Putin would be approved."

But a rash of selling brought stocks down from their morning highs.

"Some investors think prices have gone up too far, too fast and they want to get out before they fall," said Dmitry Starenko, an equity trader at Moscow brokerage Troika Dialog.

"Others just want to get out of Russia altogether."

The rouble also steadied, recovering nearly 40% of Monday's losses to finish at 25.01 per dollar.

[ image: Shoppers will hope the political changes do not affect Russia's new-found economic confidence]
Shoppers will hope the political changes do not affect Russia's new-found economic confidence
Dealers attributed the rouble's stability in part to central bank intervention to support the currency for the second day running.

Martin Diggle, a director at Brunswick Warburg, said most of the original shock of Mr Stepashin's sacking had subsided.

"People seem increasingly comfortable with the idea of Putin but uncomfortable with the ease with which Yeltsin can chop and change his prime ministers," he said.

Analysts are encouraged that President Yeltsin has committed himself to democratic elections for both parliament and the presidency.

Cautious foreign investors

But some think foreign investors will hold their fire before committing funds to Russia.

"What Yeltsin did to Stepashin is another confirmation for the West that they have to wait for new presidential elections before deciding whether or not to invest in Russia," said Oleg Martynenko, head of domestic equities and fixed income at Alfa Bank.

One of Mr Stepashin's prime economic achievements was to oversee the long-awaited securing of a $4.5bn loan from the International Monetary Fund.

The IMF is due to send a mission to Moscow later this month to monitor the programme underpinning the loan, and will be keen to see that the policies agreed with Mr Stepashin's government are still under way.

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