(Bloomberg) -- Market reaction to the resignation of Russia’s prime minister proved fleeting as investors turned their attention to the question of who President Vladimir Putin appoints.
The ruble briefly slipped lower following the announcement that Dmitry Medvedev would step down, dissolving the government. The currency soon pared losses, trading down 0.2% at 61.5750 per dollar at 6:28 p.m. in Moscow.
While some observers argued that a new government could boost Russia’s anemic pace of economic growth, others said that there could be a period of political uncertainty that may undermine the ruble’s strength.
Here’s how analysts and economists reacted to the news:
Natalia Orlova, chief economist at Alfa-Bank in Moscow
“A political risk premium could now return to the market”Market could react positively “if the new prime minister is known to the market and from the economic bloc, however if the President decides to appoint a young unknown candidate, that is likely to create some uncertainty”
Piotr Matys, emerging markets strategist at Rabobank in London
Government resignation “increases political uncertainty and should prevent the ruble from regaining its bullish momentum, at least in the coming days until Putin reveals names of potential candidates”
Dmitry Dolgin, economist at ING in Moscow
Foreign investors liked that “the outgoing government’s priority was conservative budget policy;” “now there could be a turn to a more generous budget policy”Dolgin said he doesn’t expect a sell-off in Russian assets as the event looked well-prepared
Ivan Tchakarov, economist at Citigroup Inc. in Moscow
Sees government resignation as as an attempt by Putin to “shake up” Russia’s politics and focus on its slowly-progressing public spending program“We expect a new government that spends more proactively to boost growth and incomes while preserving overall fiscal prudence”
Charles Robertson, London-based chief economist at RenCap
Says that “no market reaction is justified by Medvedev’s departure,” but if a reformer is appointed prime minister, assets could get a boost“This is not about invigorating reform – it is primarily about altering the rules so that Putin can maintain his leading position in the country, in one role or another”
--With assistance from Anya Andrianova, Kira Zavyalova and Olga Voitova.
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