The RTS index of Russian stocks began to decline in mid-May:
Source: Bloomberg investment tools.
Oil prices (and broader commodity indices) wouldn't peak for weeks, the war with Georgia didn't start until August, and the Putin/Medvedev predation on corporate Russia had been obvious for years. Why was May 2008 a turning point?
Russia is not an isolated country. The global financial turbulence has proved this fact in the recent months. When the American financial crisis started in summer 2007, Russia still appeared as a quite safe investment country with a high rate of return and a low risk. Russian firms did in 2008 still IPOs for a record of 18 billion dollars, and the cash flow to the country in dollars continued to grow, as the oil price climbed. The economy boomed and the market value of Russian firms grew rapidly in recent years. In the spring 2008, there were 13 Russian firms among the world 500 largest firms by market value, while still a year earlier there were only eight. Russian business seemed to enjoy a period of renaissance and rapid growth
In early 2008 we started to see some changes, and some Russian firms started to cancel their planned IPOs as the international demand fell. In 2008 Russian firms have done so far IPOs for only 1 billion dollars, all during the spring. Some Russian corporations complained already in spring that international interest rates stared to climb and lending was harder, but any financial crisis in Russia was still far from expected. In May 2008, we started to see the first real signs of some disturbance. International oil prices started to decline and the problems with Fannie Mae and Freddie Mac showed us that the American crisis is worse than we first expected. American institutional investors started to withdraw capital from abroad and Russia, which was seen in modest decline of the two main Russia stock indexes: RTS and MICEX.