Aeroflot lost 16.4% on Thursday, March 24, the one big name that fell as the Moscow stock exchange reopened. Nobody on the trading floor needed it explained: the U.S., the European Union and others have closed their airspace to Russian planes.
Everything else went up. The benchmark MOEX index gained 4.3%, with some companies winning back part of what they lost on the day Russia invaded Ukraine. Gazprom and Rosneft were among the limited number of stocks allowed to trade, and Gazprom jumped nearly 20 percent in early trading. A second report put the number of companies at about 30, citing the exchange’s own announcement.
It was the first trading since February 25, when the index fell 33% a day after Russian forces went in. Prices had plunged on fears of American and European sanctions, and the market was then shut for almost a month. Ruble-denominated government bonds had already restarted earlier in the week.
Curbs on the floor
Foreigners could not sell. Traders could not short, meaning bet on falling prices. And the Russian government has said it will spend $10 billion on shares in the coming months, which should hold prices up.
Tim Ash, senior emerging markets sovereign strategist at BlueBay Asset Management, called the trading “deeply managed.” He added that “for those Russians with some spare cash, there is nothing much else to buy as a hedge to inflation and currency collapse.”
A U.S. official went further and called the market a “charade,” saying Russia would “pour government resources into artificially propping up the shares of companies that are trading.” Daleep Singh, a deputy national security and economic adviser to President Joe Biden, 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.”
A small market, a larger problem
Outside Russia, the reopening barely registered. The World Federation of Exchanges put Moscow’s market capitalization at about $773 billion at the end of last year. The New York Stock Exchange, by comparison, holds roughly $28 trillion in equities.
The wider economy looks worse than the screens. The Institute of International Finance, a trade group for big financial firms, forecast a 15% drop in Russian growth this year and another 3% drop in 2023. “Altogether, our projections mean that current developments are set to wipe out the economic gains of roughly 15 years,” it said in a report. Goldman Sachs expects a smaller but still painful 10% decline in Russia’s gross domestic product, and cut its forecast for global GDP growth this year to 3.2%.
Hundreds of U.S., European and Japanese companies have left or scaled back. Russians have staged bank runs and bought up sugar and other staples in a panic.
The ruble rose that morning. At 07:13 GMT it was 1.4 percent stronger against the dollar at 96.37, after Putin said Russia would start selling its gas to “unfriendly” countries in rubles. Against the euro it stood at 106, still well off the roughly 90 seen before the February 24 invasion.
Sources
- Russia's economy is crumbling even as its stock market reopens
- Moscow Stock Exchange reopens after one month suspension
