Russia steps in to halt sell-off in stock market

DUBAI • Russian equities rose yesterday as the sanctioned nation stepped in to halt the sell-off in its stock market with a flurry of support measures when trading partially reopened, following a record-long shutdown after Russia's invasion of Ukraine.

The Moex Russia Index was up 9 per cent by 10.52am local time, paring its 29 per cent slump for the year. It had advanced as much as 12 per cent earlier in the day.

The Moscow Exchange resumed trading in 33 Russian equities out of 50 listed on the benchmark index, including in some of the biggest companies, for a shortened four-hour session.

To shield the assets from the impact of sweeping international sanctions, Russia has banned short selling in these shares, adding to an earlier restriction on foreigners exiting local equities.

It has also said its wealth fund will step in and prop up the equity market with up to US$10 billion (S$13.6 billion) when it reopens.

President Vladimir Putin on Wednesday propped up the rouble by demanding local-currency payments for natural gas purchases from "unfriendly" nations.

Mr Jakob Christensen, head of international macro and emerging market research at Danske Bank, said: "Foreign investors are not able to sell their holdings and secondly, the welfare fund in Russia is also supposed to step in and stabilise the market. Those two things are limiting the downside at the moment."

He added that it is too early to say whether the market recovery can continue.

"Fundamentally, the prices will be hit, of course, and therefore, I would be sceptical that we are not seeing significant downward price pressure in the market," he said.

"I would expect that to take place, if not today, then over time, and especially as foreigners also want to exit."

Among the biggest advancers were oil company Lukoil and gas giant Gazprom, while flag carrier Aeroflot slumped. The sanctioned VTB Bank fluctuated.

Mr Hasnain Malik, a strategist from Tellimer in Dubai, said: "With restrictions on foreign selling and repatriation, this is not a functional market in terms of efficient price discovery, given that foreigners dominate the market's free float.

"The one fundamental factor that has improved during the stock market's suspension is the partial recovery in the currency as Russia tries to shift oil and gas trade to roubles."

Since the local market last traded on Feb 25, the United States and Europe have imposed harsh penalties on Russia in response to its invasion of Ukraine - hitting everything from its ability to access foreign reserves to the Swift bank-messaging system.

On Feb 24, the day of Russia's invasion of Ukraine, the Moex Russia Index slumped as much as 45 per cent, the fifth-worst plunge in equity market history. Foreigners have fled the assets of the world's most sanctioned nation.

Russian stocks have been excluded from global benchmarks, and exchange-traded funds tracking the country's shares have been frozen, while European companies with business exposure to the country have lost over US$100 billion in market value since the war risks surged, and Russian companies' global depositary receipts slumped more than 95 per cent before being halted.

The White House slammed the partial resumption of Russian equities trading, calling it a "Potemkin market opening".

"Russia has made clear they are going to pour government resources into artificially propping up the shares of companies that are trading," it said in a statement.

"This is not a real market and not a sustainable model - which only underscores Russia's isolation from the global financial system."

Still, Mr Iskander Lutsko, chief investment strategist at ITI Capital in Moscow, said local investors could flock to Russian equities as a hedge against inflation, which has surged near levels unseen since the government's debt default in 1998.

BLOOMBERG