Russia's Stock Market Is Getting Smoked

The world awaits Sunday's referendum in Crimea on joining Russia.

Meanwhile, Russia's MICEX index continues to tumble, fall 3.5% today. Year-to-date, it's down 20.4%.

"While we expect de-escalation eventually, near term, further sanctions are likely, although we expect the impact will be manageable," said Morgan Stanley's Russia economics and strategy team. They consider three scenarios:

(i) Russia annexes Crimea post-referendum, (ii) Russia intervenes in Ukraine beyond Crimea, or (iii) a negotiated settlement. While Crimea and Russia continue on the track of annexation without diplomatic engagement, we expect further visa bans and asset freezes. If Russia were then to annex Crimea or to intervene further in Ukraine, we'd expect broader trade and finance sanctions.

"Short term, Russia's strong reserve asset position should limit the effect of sanctions," they noted. "Longer term, sanctions could mean lower growth in Russia, due to more expensive and less easily available finance, and a growing role for the state in the economy, while heightened security tension could impact global growth."