RUSSINA MARKETS COLLAPSE

Russian stock trading halted as market plummets

MOSCOW (AFP) — Trading halted on Russia's main stock markets when dealing was suspended for a second day on Wednesday as shares dived and officials pledged 44 billion dollars to fight collapsing investor confidence.

Analysts said the closure was a bid by officials to buy time to let the money filter through to the market and to reassure rattled investors.

Trading was halted on both the RTS and the Micex on the orders of a Federal Service for the Financial Markets (FSFM) after the RTS fell 6.39 percent in the first two hours, exchange officials said.

The ruble-denominated Micex suspended trading after a fall of 3.09 percent, a spokeswoman said.

The RTS has now lost 57 percent since hitting an all-time high in May, a slump analysts put down to a combination of falling energy prices, global market turmoil and political issues.

After an hour of trading, the finance ministry announced in a statement that it would inject 44 billion dollars into the market via three state banks, VTB, Sberbank and Gazprom Bank.

Analysts said the FSFM stepped when in it became clear the money would not get to the market quick enough.

"It took too long for the money to get into the system," said Uralsib analyst Chris Weafer. "They were afraid of panic selling so they stopped the market."

The FSFM said the markets would remain closed at least until 5:00 pm Moscow time (1300 GMT), Interfax news agency reported.

"It is good that they closed the market. There was panic" in the market, said Vladimir Osakovsky an economist with the UniCredit Aton investment bank.

"This money will have some effect and at least stabilise the market," he said.

The financial sector led Wednesday's falls, with state-controlled retail banking giant Sberbank plummeting 17.33 percent on the RTS.

The turmoil came a day after some of the sharpest drops seen on the Russian market since the financial collapse of 1998 when the RTS fell 11.47 percent and the Micex fell 17.45.

Both markets were closed for an hour on Tuesday by the FSFM.

Analysts said those falls were due to turmoil on Wall Street in the wake of the Lehman Brothers investment bank collapse, a massive US government bailout of insurance giant AIG and a dramatic fall in the oil price.

The technical problems on Tuesday caused earlier problems to "snowball" said Osakovsky.

Rumours of the failure of Moscow-based investment bank Kit Finance, also caused a wave of panic on the market, analysts said.

Many investors now expect the state to announce a deal bailing out the bank before markets reopen, said Uralsib's Weafer.

Prime Minister Vladimir Putin said on Tuesday that Russia could withstand financial turmoil, the latest in a string of speeches by top officials urging calm.

Before the latest wave of turmoil on Wall Street, investors were selling Russian stocks because of falling commodity prices, turmoil in international markets and political uncertainty, analysts said.

Increasing tensions with the West stoked by Moscow's military intervention in Georgia last month also hit prices -- the RTS has fallen more than a third since the conflict began.

President Dmitry Medvedev last week said that a quarter of the market's losses could be attributed to the conflict, in part reflecting fears a stand-off with the West would hurt business.

The rest, he said was the result of global financial turmoil.

Weafer said worries at the prospect of further drops in the prices of oil -- the commodity that has fuelled Russia's spectacular economic surge in recent years -- were also taking a toll on markets.

Traders feared that further oil price declines could bring about a fundamental reassessment of Russia's economic prospects, he said.