The Russian stock market resumes trading amid severe restrictions

The Russian stock market resumed limited trading amid severe restrictions on Thursday, nearly a month after prices fell and the market closed following Moscow’s invasion of Ukraine.

Trading in a limited number of stocks, including energy giants Gazprom and Rosneft, took place amid restrictions aimed at preventing a repeat of the massive sell-off that took place on February 24 in anticipation of western economic sanctions. Foreigners cannot sell and dealers are barred from short selling or bet prices will fall.

The benchmark MOEX index gained 8% in the first few minutes of trading.

The reopening of stock trading on the Moscow Stock Exchange has little impact on investors outside Russia. Its market capitalization is only a fraction of that of the major Western or Asian markets.

Foreign investment managers lost a reason to buy Russian stocks after MSCI Inc. declared the market “uninvestable” following the Feb. 24 Russian invasion and removed it from global indices.

Hundreds of US, European and Japanese companies have pulled out of Russia.

There were bank runs and hoarding of sugar and other staples. The Russian ruble fell.

Foreigners are barred from selling shares under rules imposed to counter Western sanctions on Russia’s weakening financial system and currency.

According to a central bank announcement, trading will be allowed in 33 of the 50 companies that make up the MOEX index, including airline company Aeroflot, state-owned gas producer Gazprom and oil giant Rosneft.

The shares were last traded in Moscow on February 25. A day earlier, MOEX fell 33% after Russian troops invaded Ukraine.

According to the World Federation of Exchanges, the Moscow Stock Exchange had a market capitalization of about $773 billion at the end of last year. That is dwarfed by the New York Stock Exchange, where the total of all shares is around $28 trillion.

The Central Bank of Russia resumed trading in ruble-denominated government bonds this week.

The central bank estimates that by the end of 2021, about 7.7 trillion rubles, now about $76 billion, of Russian stocks were owned by retail investors.

The Russian government could step in to support its companies and investors. Prime Minister Mikhail Mishustin said on March 1 that the country’s National Wealth Fund would buy up to $10.2 billion worth of Russian stocks by the end of the year.

Before the war, foreign investors showed growing interest in Russian equities as an emerging market opportunity. But about a week into the war, Russia was removed from the emerging market indices compiled by MSCI, a division of Morgan Stanley.

MCSI said that after consulting with a large number of asset managers, it determined that the Russian stock market was uninvestable. That has taken away a primary incentive for fund managers to invest there.

On March 3, the London Stock Exchange suspended trading in the shares of 27 companies with links to Russia, including some of the largest in the energy and financial sectors.

The shares lost most of their value before the suspension.

Rosneft shares fell to 60 cents on March 2 from $7.91 on February 16th. Sberbank crashed from $14.90 to 5 cents.

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