The RTS Index fell by about 80% during Russia's 1998 financial crisis. The index, launched in 1995 and denominated in U.S. dollars, reflected the collapse in valuations of major Russian companies during the country's sovereign-debt and currency crisis.
Russia faced falling commodity revenues, weak tax collection, large budget deficits, and heavy reliance on short-term government debt known as GKO bills. Political uncertainty made it harder to maintain confidence. On August 17, 1998, the government devalued the ruble, defaulted on domestic debt, and declared a moratorium on some foreign debt payments.
The ruble then lost much of its value, banks failed or were restructured, and investors withdrew from Russian assets. Because the RTS was dollar-based, the index was hit by both falling local share prices and the ruble's depreciation against the dollar.
The crisis also contributed to the near-collapse of Long-Term Capital Management, a highly leveraged U.S. hedge fund with major market exposures. Russia's economy eventually recovered, helped substantially by later increases in oil prices.