Page last updated at 10:47 GMT, Thursday, 18 September 2008 11:47 UK

Moscow tries to stem market panic

Traders in Moscow 17/09/09
Moscow markets have collapsed since highs in May

Moscow's stock markets are to remain closed until Friday, as the government tries to stem a plunge in share prices and restore confidence in the economy.

Finance Minister Alexei Kudrin said 60bn roubles (1.3bn) would be pumped into Russia's three largest banks to help bolster the financial markets.

President Dmitry Medvedev said supporting the financial system was the government's "most important priority".

The crash has brought back memories of Russia's financial crisis of 1998.

Then the rouble was devalued, the country defaulted on its debts, and many banks failed.

While the country's economy as a whole is now in far better shape, there is still great uncertainty over what is around the corner, leading to a collapse in confidence, says the BBC's James Rodgers in Moscow.

Investors flee

Financial regulators halted trading on Wednesday after stocks fell to the lowest level in nearly three years.

Obviously, the crisis on the world financial floors is more profound than the most pessimistic earlier forecasts
President Dmitry Medvedev

Russia was not alone. Markets around the world have dived this week as several big banking names have gone under due to the effects of the credit crunch.

But it has shocked a stock market which was hitting record highs as recently as May this year, helped by an economy riding high on record oil and gas prices.

While the global turmoil and a slide in the price of Russia's abundant oil are some of the causes, analysts also point to investors fleeing Russia in the aftermath of its war with Georgia.

About 20bn has been pulled out of Russia since early August, Reuters estimates.

The executive board of Micex, one of Russia's two main exchanges, called the situation "extraordinary".

In a bid to support the banking sector, the finance ministry has pledged billions of dollars of loans.

Facing a liquidity squeeze, central bank officials on Thursday cut the reserves banks were allowed to hold, forcing them to release billions of roubles.

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