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UPDATE 1-Russian stocks down as West investigates Poland missile hit

Reuters · 11/16/2022 02:38
UPDATE 1-Russian stocks down as West investigates Poland missile hit

This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine.

Recasts, updates with stock market open

Russian stocks were trading lower on Wednesday morning, while the rouble was stable, as investors sold-off some Russian assets amid a flurry of Western diplomacy and investigations into a missile hit that killed two people in Poland on Tuesday.

Russia's stock markets fell by more than 1% at the open, with the dollar-denominated RTS index .IRTS down 1.3% at 1,145.2 points. The rouble-based MOEX Russian index .IMOEX was 1.2% weaker at 2,197.9 points.

Russian blue-chip stocks had sold off by up to 4% on Tuesday evening when reports of the missile hit first emerged, before paring some losses.

The rouble was more steady in early trading. At 0705 GMT the rouble was 0.1% weaker against the U.S. dollar at 60.43 RUBUTSTN=MCX and 0.1% up against the euro at 62.76 EURRUBTN=MCX.

Analysts said traders were likely to remain cautious on Wednesday, as NATO was due to
hold an emergency meeting
over the incident in Poland.

The West was scrambling overnight to investigate the cause of the strike in the village of Przewodow, Poland's border with Ukraine.

U.S. President Joe Biden said
early information suggested it may have been caused by a missile fired from Russia. Ukraine and Polish authorities said the explosion, which killed two people, had been caused by a Russian-made missile.

Some market analysts said the sell-off in Russian stocks - modest for a market which is prone to bouts of sharp volatility - could present a buying opportunity.

"Investors regarded the incident in Poland as an opportunity to buy on a drawdown," said Yaroslav Kabakov, strategy director at the Moscow-based Finam brokerage.

"If the situation does develop into escalation with Western countries, Russian indexes will be able to increase."

Strict sanctions on Russia's financial system, as well as counter-sanctions from Moscow, have largely locked Western investors out from Russian financial markets, with domestic traders responsible for the bulk of trading and market moves.

The Russian currency, which is under strict capital controls, appeared to be unfazed, despite the geopolitical headwinds. It is being supported by a month-end tax period in which companies convert foreign currency earnings into roubles to cover domestic liabilities, and analysts say it could still advance to 60 per dollar in the coming days.

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM

(Reporting by Reuters; Editing by Lincoln Feast; Editing by Bradley Perrett)