Russian & Ukrainian markets hit by political risk (Sep 08)

While the conflict in South Ossetia is likely to have little direct impact on the Russian economy, financial markets have been hit hard by a rise in political risk. The currency has dropped by 3% since the start of August, while equities are down by over 30% from their highs earlier this summer. Fears that Russia might soon turn its attention to Ukraine have hit financial markets there as well. Ukrainian equities are down by 4% on the month, while bond spreads have widened by 15bps.