NEW YORK (AP) – Russia plans to reopen its stock market for limited trading on Thursday, nearly a month after shares fell and the exchange was closed after the invasion of Ukraine.
Heavy trade restrictions will be in place intended to prevent the massive sales that took place on February 24 in anticipation of crushing financial and economic sanctions from Western countries.
Trading will be allowed in 33 of the 50 companies that form part of the country’s benchmark MOEX index, including air carrier Aeroflot, state-owned gas producer Gazprom and oil company Rosneft, according to the reopening announcement by the central bank.
Stocks were last traded on February 25 in Moscow. The MOEX sank 33% the day before Russian President Vladimir Putin ordered an invasion of Ukraine.
When Moscow markets reopen, trading will be limited, and it may be difficult to gauge investor true sentiment.
The country has banned short-selling, in which investors essentially bet on stock prices to go down. And foreign shareholders will be unable to sell the shares – a sanction Russia has imposed to counter Western sanctions against its financial system and the ruble, which has been sharply devalued.
Moscow’s stock exchange is small, with a market capitalization of about $773 billion at the end of last year, according to the World Federation of Exchanges. It is dwarfed by the New York Stock Exchange, where all equity totals approximately $28 trillion.
According to Ben Johnson, director of global ETF research at Morningstar, the average risk in Russia through a mutual fund or retirement account by an American investor is very small.
“If someone had a traditional 60% stock, 40% bond portfolio matched to a global index, their exposure to Russia would be about 0.02% of their portfolio,” Johnson said. “Russia is barely registered.”
The reopening of Russia’s stock market has only minimal economic significance compared to the heavy lifting of US-led sanctions. A myriad of US, European and Japanese companies have moved out of the country; Banks are running out and staples like sugar are panicking; And Russia’s currency, the ruble, has been beaten.
It took about a month for Russia’s central bank to resume trading in local government bonds, denominated in rubles. However, the average Russian trades in Russian stocks. Russia’s Central Bank has estimated that by the end of 2021, about 7.7 trillion rubles of Russia’s stock, the equivalent of about $79 billion, were owned by retail investors.
Russia’s government is expected to take steps to support its companies and investors on Thursday and in the coming days. Prime Minister Mikhail Mishustin said on March 1 that the country’s national wealth fund would buy up to 1 trillion rubles ($10.2 billion) in Russian stocks by the end of the year.
Before the war, interest in Russian stocks was growing among foreign institutional investors looking for opportunities in emerging markets. But nearly a week after the war, Russia was dropped from an emerging markets index compiled by MSCI, a division of Morgan Stanley.
MCSI said it determined the Russian stock market as “uninvestable” after consultation with a number of asset managers. This took away a primary incentive for fund managers to invest there.
On 3 March, the London Stock Exchange suspended trading in the shares of 27 companies with links to Russia, including some of the biggest companies in energy and finance. The shares lost most of their value before the suspension. For example, shares of the energy company Rosneft fell from $ 7.91 on February 16 to 60 cents on March 2, while shares of Sberbank fell from $ 14.90 to 5 cents in the same time frame.
The Associated Press