Russian Stock Market Rallies After Being Closed for a Month

Russia has become a premier emerging market and member of the BRIC nations (the emerging markets of Brazil, Russia, India, and China) following its explosive 700% growth between 2001 and 2006. Driven by large crude oil reserves and moves towards free-market initiatives, the country became a popular destination for many investors. The country’s 2014 military intervention in Ukraine and a downturn in commodity prices have hurt its prospects, but investors should still keep an eye on this $1.6 trillion economy. Moscow’s stock market has rallied after share trading resumed for the first time since being suspended when the Ukraine invasion began nearly a month ago, although the US dismissed Thursday’s limited reopening as a “charade”. From midday on Wednesday, SPB Exchange allowed securities of another 1,639 foreign companies to be bought and sold by domestic market players, most of whom are Russian residents who use the platform to trade foreign stocks.

Russia’s central bank relaunched trading in ruble-denominated government bonds this week. Stocks are set to fall at the opening bell Monday as investors grapple with what the latest headlines about Russia and Ukraine mean for the global economy. Sanctions are hitting the Russian economy hard, and the measures that Moscow is taking in response, including restricting access to foreign currency and raising interest rates, further limit what companies can do.

The halts by the NYSE were due to „regulatory concern,“ according to its website. The Nasdaq and New York Stock Exchange halted trading in US-listed Russian stocks on Monday following the invasion of Ukraine and harsh sanctions from Western countries imposed against Moscow. This may seem like an odd way to trade, but Whitton points out that this happened several times before. Greece was closed for six weeks several years ago, but Greek ETFs in the U.S. continued to trade. When the Greek market finally reopened, the Greek stocks priced at almost exactly what the ETFs were trading them for.

The rouble fell by nearly 10%, to about 98 roubles to the dollar, reversing Wednesday’s gains after Vladimir Putin said “unfriendly” countries would be forced to pay for their gas purchases in roubles rather than dollars. „Margin calls are unavoidable tomorrow (when stock market reopens), the market has drastically changed,“ Timofeyev from NAUFOR said, adding that brokerage firms have tried to prepare by closing down some of their positions. NCC was selling OFZs held by Univer Capital at yields of between 17% to 20% versus 15% on average on the market that day, according to an internal Univer Capital memo seen by Reuters and confirmed by Tuzov. „NCC has blocked the company’s trading limit and… is selling (our OFZ) assets as a result. The trading limit will be unblocked after (mandatory) sale is over,“ Tuzov told Reuters. Artyom Tuzov, executive director in the capital markets department at Univer Capital, said falling OFZ prices, which move inversely to yields, triggered margin calls and a liquidity shortage at the brokerage as a result.

„All operations by NCC are aimed at limiting systematic risks so issues of a single brokerage do not spill over on the overall market,“ the Moscow Exchange, parent company for NCC, said in a statement. As a result, nearly a hundred of Univer’s clients faced combined losses of 174 million roubles ($1.7 million), the memo said.

Investors who screen their investments according to environmental, social and governance, or E.S.G., principles are also reconsidering their exposure to all things Russian. The NYSE and Nasdaq have announced today that they are halting trading in several Russia-based stocks that list on their respective exchanges. If you choose to invest in Russian ETFs or mutual funds, you’ll want to look at the country’s economic health before making an investment decision. A wide array of information on this subject, including current events analysis and economic data, can be found on the World Bank’s website.

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Before the war, foreign investors were showing growing interest in Russian stocks as an emerging markets opportunity. But roughly a week into the war, Russia was removed from emerging markets indexes compiled by MSCI, a division of Morgan Stanley. Trading of a limited number of stocks including energy giants Gazprom and Rosneft took place under curbs that are meant to prevent a repeat of the massive selloff that took place Feb. 24 in anticipation of Western economic sanctions. Foreigners cannot sell and traders are barred from short-selling, or betting prices will fall. Russian energy companies Gazprom (OGZPY) and Lukoil (LUKOY) and top financial firm Sberbank (SBRCY) are among the top holdings in all three funds.

Since then, the exchange has expanded to include financial instruments ranging from cash equities to commodity futures. The central bank estimates that roughly 7.7 trillion rubles, now equal to about $76 billion, of Russia’s stock was owned by retail investors as of late 2021. Trading will be allowed in 33 of the 50 companies that are part of the MOEX index, including air carrier Aeroflot, state-owned gas producer Gazprom and oil giant Rosneft, according to a central bank announcement. Germany announced plans over the weekend to allocate 100 billion euros to a special fund for more defense spending. Wall Street is worried about the impact of more economic sanctions against Russia following its invasion of Ukraine, and the fact that Russia has put nuclear weapons forces and other deterrents on high alert.

Russia’s MOEX stock market index had already plunged 50% last week in the wake of the invasion of Ukraine. While individual Russian stocks that trade on US exchanges were halted, trading in the VanEck Vectors Russia ETF was not. The decline in the RSX ETF gives an idea of the type of carnage the Russian stock market would have experienced today if it were opened, and what it might experience when it is eventually reopened.

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„There are an array of sanctions affecting RSX but we have not halted creates or redeems,“ Jan Van Eck, CEO of VanEck, said in an email. „The ETFs became the proxy for the Greek market,“ Todd Rosenbluth, head of ETF and mutual fund research for CFRA Research, told me. What this means is that ETFs can be on the market, even with the underlying market closed. How can Russian ETFs trade when the underlying securities are not trading?

Meanwhile, Russia has made clear they are going to pour government resources into artificially propping up the shares of companies that are trading,” he said. When the market reopened, only 33 stocks (out of several hundred) were allowed to trade, under heavy restrictions. Foreign investors couldn’t sell their holdings, and there was a blanket ban on short-selling, which stopped traders from betting on falling prices. The Russian stock market was never as important to its national economy as its counterparts in the United States, Europe and elsewhere are to theirs.

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Trading and settlement is conducted in U.S. dollars but the funds will remain on the brokerage accounts and cannot be cashed out amid Western sanctions on Russia and capital controls that Moscow has introduced in retaliation, the exchange said. Russian companies with listings on foreign markets, which continued to trade after the Moscow market was closed, have seen their values plunge to nearly zero. The fact that companies are worth something at home but considered worthless abroad neatly captures how comprehensively the Russian market has been severed from the rest of the world.

Russia has prevented foreign investors from selling rubles for dollars. In New York, the 1914 restrictions were designed “to stop Europeans from selling their shares and cashing out their dollars for gold, and it worked,” Mr. Silber said. Shares of Yandex, which traded down more than 20% in pre-market trades on Monday before being halted, were among the Russian stocks that could not be traded, along with Ozon Holdings, Mobile TeleSystems, and Mechel.

Both markets fell sharply when they initially reopened, but regained their footing and have been trading ever since. Mr. Grapengiesser of East Capital said he had been getting “three calls a day” from foreign hedge funds looking to buy his Russian shares at steep discounts. (The firm holds hundreds of millions of dollars in Russian stocks across its funds.) He isn’t interested in selling, and he doesn’t know how he would complete the transactions anyway, since as a foreign-owned fund his holdings are frozen. The central bank has not indicated when it will allow the Russian stock market to reopen.

Defense stocks were among the few standouts, rallying after Germany announced plans to increase its military spending. The Franklin FTSE Russia (FLRU) ETF was down nearly 15% in early trading Monday. The declines come after the United States and Europe imposed even tougher sanctions on Russia following its invasion of Ukraine. Oil prices have soared to seven-year highs in recent days due to concerns about a disruption in supply from Russia, the world’s No. 2 producer of oil. Citi noted in the filing that it is „pursuing the exit“ of its global consumer banking business in Russia but it still expects to have a presence in Russia through its institutional clients group for businesses. The Russell 2000, an index of smaller American companies, was also up Monday.

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Traders agreed that the heavy restrictions meant Moscow was not a properly functional market. “The Moex rallied in early trade, but that is what happens if lots of people can’t sell,” Neil Wilson of Markets.com pointed out. It was its first session since 25 February when trading was halted after sanctions scalping trading meaning sent Russian equities tumbling. Trading of OFZ government bonds restarted on Monday, with the central buying OFZ papers in an effort to limit volatility. That could lead to billions in dollars of losses for BP, which said it would divest its 20% stake in Russian oil giant Rosneft on Monday.

The market initially rose by more than 11% when a limited, shortened trading session got under way on the Moscow Exchange. But the rally lost some momentum, with the Moex index of blue-chip shares ending the day 4.4% higher. Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. Trading on the derivatives market with contracts on Moscow Exchange and individual shares, included on the Moscow Exchange index, will take place from 10 a.m. (0700 to 1100 GMT) in the usual format, the central bank said on Wednesday.

From there, you can find a link to the public company’s website, where annual reports and other important disclosures are typically found. These reports are helpful when evaluating individual stocks or bonds rather than the broad economy. On March 3, the London Stock Exchange suspended trading in shares of 27 companies with links to Russia, including some of the biggest in energy and finance. MCSI said that after consultation with a large number of asset managers it determined the Russian stock market to be uninvestable.

But on Thursday, almost a month after the market closed, trading partly resumed. Market capitalization shows the value of a corporation by multiplying the stock price by the number of stocks outstanding. Large-cap stocks are usually industry and sector leaders and represent well-known, established companies.

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The Russell 2000 (IWM) is holding just above its 200-day MA but has been curtailed by its 20-day MA; this squeeze will have to resolve eventually,… Investing.com — U.S. tech stocks were rising after the annualized core inflation reading for August met expectations, stoking hopes the Federal Reserve https://1investing.in/ is reaching the end of its… Investors should consider these risks in the context of their portfolios. In a diversified portfolio, it might make sense to include exposure to Russian equities or bonds despite their higher risk. A diversified portfolio may increase long-term risk-adjusted returns.

For example, Russia’s economy may have contracted 0.2% in 2015, but the country’s equity market may have appreciated if these losses were better than expected. For example, GDP growth in 2018 surpassed expectations at 2.3%, and the World Bank’s forecast for 2021, 2022, and 2023 just as lucrative—3.2%, 3.2%, and 2.3%, respectively. If you prefer to invest directly in Russia’s RTS, you can analyze stocks using the English version of the RTS website.

Largest companies by market cap — Russian Stock Market

So far, it said currency and money-market trading on the Moscow Exchange would begin at 10 a.m. Local time on Tuesday, which is a delayed start from its normal start time. The bank also said its extended hours trading in the morning and evening will be canceled from March 1 until March 5.

Even so, “the market reopening has performed above my expectations,” Mr. Grapengiesser said of the Moscow Exchange’s staged approach. And with Russians’ money now effectively trapped in the country, more people may decide to invest in the stock market, he said. „You look at the futures, and if the futures are down X, the stocks might be expected to be down Y,“ Harry Whitton, head of ETF sales trading at Old Mission Capital, told me.

• The Russian stock market resumed limited trading Thursday under heavy restrictions almost one month after prices plunged and the market was shut down after Moscow’s invasion of Ukraine.
• And he said some overseas markets were talking about facilitating trading in Russian shares.
• But roughly a week into the war, Russia was removed from emerging markets indexes compiled by MSCI, a division of Morgan Stanley.
• MCSI said that after consultation with a large number of asset managers it determined the Russian stock market to be uninvestable.

That took away a primary incentive for fund managers to invest there. Foreigners are barred from selling shares under rules imposed to counter Western sanctions against Russia’s weakening financial system and currency. Global markets had been turbulent last week after Russian President Vladimir Putin launched an invasion of Ukraine, and the pain has spread beyond stocks.

Russia owes billions to foreigners in dollar-denominated bonds but might fail to pay up because of the heavy sanctions on it from the war on Ukraine. Hong Kong’s Hang Seng lost as much as 1.6%, before closing down 0.2%. Japan’s Nikkei 225 and Korea’s Kospi erased earlier losses and were up 0.2% and 0.8%, respectively. Shares of defense contractors Northrop Grumman (NOC), Raytheon (RTX), General Dynamics (GD) and Lockheed Martin (LMT) were all up between 3% and 6% in premarket trading Monday.