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Riot police detain a man in a Vladimir Putin mask during an opposition protest in St. Petersburg, late on Dec. 8, 2011. Russian stock markets have been rattled by demonstrations against the parliamentary election results.Olga Maltseva/AFP/Getty Images

Protests in Moscow have sent investors scrambling from Russia's equity markets this week, with Russia's main indexes suffering their worst weekly drops in almost a month.

During the past week, Moscow's RTS index lost 8.8 per cent, while Micex, the second main exchange, dropped 7.2 per cent.

External factors, such as the euro zone debt crisis, have not helped Russian financial markets, and neither has the fact that many funds are racing to close positions before the end of the year.

But the main driver appears to be nervousness about Russia's political climate after allegedly falsified parliamentary elections on Sunday and the protests that have followed.

More than 30,000 people have announced via Facebook, the social networking site, that they would participate in a protest in central Moscow on Saturday. Dozens of other actions were being planned across the country, from Kaliningrad to Vladivostok.

Tom Mundy, chief strategist at Otkritie, the investment bank, said investors would be looking to see whether Saturday's protests lead to further demonstrations, and how harshly the authorities react.

Uncertainty about what will come next, and mixed messages about the election from the Kremlin, had contributed to "a real sense of unease among foreign investors," Mr. Mundy added.

"It doesn't really reinforce a positive short-term view on Russia."

The stock market is viewed as more volatile than other indicators. The ruble remained largely flat against the dollar for most of the week, and Russian funds reported just $16-billion (U.S.) of capital outflows in the week ending on Wednesday, Dec. 7 – a modest number, given equity markets' decline.

All the same, the recent turn of political events has left investors questioning the weight of their Russian investments.

While few are drawing comparisons between the recent demonstrations in Moscow and the Arab Spring, the bigger concerns seem to be how long the political uncertainty will last, and what it will mean for long-promised investor reforms.

Nikolay Podguzov, head of fixed-income strategy at VTB Capital, said the benchmark price for Russia's 2030 euro bond was down 2.5 percentage points over the week, just slightly underperforming its peers. Any intervention on the currency market by the Russian central bank was probably "muted," he added.

But Mr. Podguzov said traders in those markets were keeping a close eye on the political situation.

VEB, the Russian state lender, decided to pull a $500-million euro bond issue this week, worried that concern over the political situation would affect the sale.

Mr. Mundy said Russia's privatization plans would probably be pushed back even more, as foreign investors remained concerned about the political situation, especially in the lead-up to the March presidential election.

While investors might have thought a broader reform program was in the cards for Russia, Vladimir Putin's announcement that he would seek to return to the presidency and the subsequent firing of finance minister Alexei Kudrin, a fiscal hawk, had made them realize there was less to hope for, Mr. Mundy added.

"This was the first big blunder," he said.

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