Home ›› 24 Mar 2022 ›› Stock
The Russian stock market is likely to reopen soon with a very different shape as a plan to separate the market for foreign and local investors is under discussion.
The Wall Street Journal cited a source familiar with the matter when claiming that the Russian stock market is now preparing for a reopening that will be in an unusual way.
The stock markets in Russia have been shut for nearly a month due to the Ukraine war. Now officials are claimed to have signaled that the country’s stock market will reopen soon.
The challenge for Moscow is that the resumption of trading sends Russian stocks back into free fall. On February 24, when President Vladimir Putin began attacking Ukraine, the main Russian stock market index fell 33 per cent.
While the index recovered some of those losses on February 25 (the last day of trading), this was before Western sanctions hit the ruble and plunged the country into an economic crisis.
To limit the fallout, Moscow turned to some heavy-handed policies. This prevented foreign investors from lowering local equities – a move that some market participants saw as retaliation for the West’s freezing of Russian central bank holdings because a large part of the Russian market is foreign-owned. The Russian government has instructed a sovereign wealth fund to purchase billions of dollars worth of shares.
The Central Bank of Russia said markets will gradually reopen. Step one took place on Monday, when trading in government bonds resumed. While officials haven’t given a date for the exchange’s reopening, it could be soon. That will be “probably this week or next week,” Moscow’s Aton brokerage said in a report released Monday.
It’s the headquarters of Russia’s central bank, which says it will gradually reopen the country’s financial markets.
Under a policy announced by the central bank on February 28, Russian brokerage firms are not allowed to sell securities to foreign clients. This will prevent foreigners from escaping as soon as the market reopens, which can be devastating due to their large role in Russian stocks.
According to Sberbank Investment Research, international institutional investors held about three-quarters of the free float of the Russian market as of February 2020.
This has raised concerns that the market will be skewed due to the absence of foreign investors, who accounted for almost half of the stock trading volume on the Moscow Stock Exchange in the first half of last year.
“While a very large class of players in the market – foreigners – will not be able to sell, there will be the illusion of a working and recovering Russian stock market,” said Vladimir Kreyndel, CEO of Moscow-based ETF Consulting. advises issuers of exchange-traded funds.
Western investors who held Russian shares before the freeze included wealth management giants Vanguard Group and Fidelity International. Both firms said they were reducing exposure to Russia.
