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Russia: Exchange Halts Trading Amidst Heavy Losses

Prague, 28 October 1997 (RFE/RL) -- Russia's Federal Commission for the Securities market suspended trading on the Russian Trading System until 2 p.m. today as the world's equity markets continued a downward spiral.

Vidim Bely, a spokesman for the agency, said the commission cited a "crisis in world markets" for its decision to halt trading. The closure comes after trading yesterday resulted in the deepest losses in the Russian exchange since July 1996.

Traders were widely predicting that Russian stocks would decline again today as investors and traders rushed to sell their shares. Traders in Moscow as saying that they fear a decline in stock markets around the globe will decrease the demand among foreigners for Russian shares.

The Russian Trading System index of 21 stocks yesterday dropped 6.3 percent to 485.16 points. That is a six-week low and the largest one-day decline in Moscow since July 8, 1996. The losses came as investors in Hong Kong, London, Frankfurt, Paris, Tokyo and New York attempted to sell off massive amounts of shares amid concerns about higher interest rates and an economic downturn in Asia.

On the Russian exchange, some of the biggest declines yesterday came among the shares that are most commonly owned by foreign investors. Those include oil producer Luoil Holding; the monopoly utility Unified Energy System; and Moscow's utility Mosenegro.

Lukoil shares fell yesterday from $26.40 to $24.25 each. Shares in Unified Energy System, the company that distributes power across Russia, fell to 37.8 cents from 40.8 cents per share.

Meanwhile, shares in Mosenegro, the utility that supplies heat, light and power to the Moscow region, slumped to $1.62 from $1.75 per share.

Oleg Galkin, a stock trader for the Dutch bank ING Barings, told Bloomberg News that the declines on the Russian exchange are especially difficult for small firms in Russia that are shareholders. Galkin said many of Russia's small firms are not in the position to withstand such losses.