Energy and metals companies led a surge in Russian stocks on Thursday as trading resumed after nearly a month’s halt, reflecting soaring global prices for oil, gas, and other commodities on fears that the Ukraine crisis will disrupt supply.
A government commitment to support stocks also bolstered the market, prompting a senior US official to dismiss the limited resumption of trading as “a charade: a Potemkin market opening.”
Stocks had not traded on Moscow’s stock exchange since Feb. 25, the day after President Vladimir Putin sent troops into neighboring Ukraine, prompting Western sanctions aimed at economically isolating Russia and then Russian countermeasures.Russia’s stock market is in bad shape. Its fragile state reflects Russia’s overall precarious financial situation, with the country’s economy increasingly isolated and institutions unable to function as they once did.
When the market reopened a month later, only 33 stocks (out of hundreds) were permitted to trade due to severe restrictions. Foreign investors were unable to sell their holdings, and short-selling was prohibited, preventing traders from betting on falling prices. The government had promised to spend up to $10 billion on stock purchases. Every day, trading was open for about four hours.
The Russian stock market has never been as important to the Russian economy as its counterparts in the United States, Europe, and elsewhere. Russia’s market is now worth around $400 billion, or roughly the same as Walmart. Trading in Moscow is dominated — or was dominated — by foreign investors, who own the vast majority of tradable shares.
However, investing in Russian stocks is now a much different proposition. Sanctions are having a significant impact on the Russian economy, and Moscow’s response measures, such as restricting access to foreign currency and raising interest rates, limit what companies can do even more. Investors who screen their investments based on environmental, social, and governance principles, or E.S.G., are rethinking their exposure to all things Russian.
According to IHS Markit, the Russian economy will contract by 11% this year, while inflation will more than triple to 20%. According to their projections, the country will not return to its prewar size until the 2030s.
Russia’s public companies, which tend to be the largest and most international in scope, are increasingly isolated from foreign markets, particularly if their owners are sanctioned by the West. According to S&P Global Market Intelligence, the average Russian public company has a one-in-five chance of defaulting on its debt.
Russian companies with foreign market listings that continued to trade after the Moscow market closed have seen their values plummet to near zero. The fact that companies are valuable at home but worthless abroad neatly captures how completely the Russian market has been cut off from the rest of the world.
|ACRON PJSC SPONSORED GDR 144A
|ACRON PJSC SPONSORED GDR REG S
|AEROFLOT RUSSIAN INTL AIRLS SPONSORED GDR 144A
|AEROFLOT RUSSIAN INTL AIRLS SPONSORED GDR REG S
|AEROFLOT RUSSIAN AIRLS JSC SPONSORED ADR
|AO MOSENERGO SPONSORED ADR 144A
|AO MOSENERGO SPONSORED ADR REG S
|AO MOSENERGO SPONSORED ADR
|AO TORGOVY DOM GUM SPONSORED ADR
|AO TATNEFT SPONSORED ADR
Companies domiciled in Russia with equity or dept trading in US dollars – Review the entire dynamic list here.
*A portion of this article was originally posted in The New York Times.