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Monday, January 30, 2023

The Russian Stock Market Opens for Full Trading, Restricted Trading Rules Lifted

Following Moscow’s invasion of Ukraine, the Russian stock market resumed limited trading on Thursday under tight restrictions, over a month after prices plummeted and the market was shut down.

A small number of companies, including energy behemoths Gazprom and Rosneft, were traded under restrictions designed to prevent a repetition of the enormous selloff that occurred on Feb. 24 in anticipation of Western economic penalties. Foreigners are unable to sell, and dealers are prohibited from shorting stocks in the hopes of a price drop.

In the first few minutes of trade, the benchmark MOEX index rose 8%.

Outside of Russia, the restoration of stock trading on the Moscow Exchange has had minimal impact. Its market capitalisation is a sliver of what big Western or Asian markets are worth.

Following the February 24 invasion, MSCI Inc. deemed the Russian stock market “uninvestable” and withdrew it from global indexes, eliminating one rationale for foreign investors to acquire Russian equities.

Hundreds of enterprises from the United States, Europe, and Japan have left Russia.

Bank runs have occurred, as well as frantic purchases of sugar and other essentials. The value of the Russian currency has plummeted.

Under regulations created to fight Western sanctions against Russia’s failing banking system and ruble, foreigners are prohibited from selling shares.

According to a central bank announcement, trading will be permitted in 33 of the 50 businesses that make up the country’s benchmark MOEX index, including airline Aeroflot, state-owned gas producer Gazprom, and oil major Rosneft.

The last time stocks traded in Moscow was on February 25. The MOEX had dropped 33% the day before as Russian armies invaded Ukraine.

According to the World Federation of Exchanges, Moscow’s stock exchange had a market value of $773 billion at the end of last year. The New York Stock Exchange, where the total value of all stocks is nearly $28 trillion, dwarfs this.

This week, Russia’s central bank reopened trade in ruble-denominated government bonds.

As of late 2021, the central bank estimates that retail investors controlled around 7.7 trillion rubles ($79 billion) of Russia’s equity.

Russia’s government may step in to help its businesses and investors. Prime Minister Mikhail Mishustin said on March 1 that the country’s National Wealth Fund will buy up to 1 trillion rubles ($10.2 billion) in Russian stocks before the end of the year.

Foreign investors were becoming increasingly interested in Russian equities as an emerging markets potential prior to the war. However, Russia was removed from Morgan Stanley’s MSCI emerging markets indexes around a week after the war began.

MCSI stated that it assessed the Russian stock market to be “uninvestable” after consulting with a significant number of asset managers. This removed one of the main reasons for fund managers to invest there.

On March 3, the London Stock Exchange halted trading in shares of 27 Russian-linked businesses, including some of the world’s largest in the oil and financial industries.

Prior to the suspension, the shares had lost the majority of their value.

Shares of Rosneft fell from $7.91 on February 16 to 60 cents on March 2. Sberbank’s stock has dropped from $14.90 to 5 cents.

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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