Russian stock market, crushed by war, opens with big limits

People walk past a currency exchange office screen displaying the exchange rates of U.S. Dollar and Euro to Russian Rubles in Moscow's downtown, Russia, on Feb. 28, 2022. Russia plans to reopen its stock market for limited trading on Thursday, march 24, 2022, nearly one month after shares plunged and the exchange was shut down following the invasion of Ukraine.(AP Photo/File)

NEW YORK (AP) — The Russian stock market opened Thursday for limited trading under heavy restrictions for the first time since Moscow invaded Ukraine, coming almost a month after prices plunged and the market was shut down as a way to insulate the economy.

Trading of a limited number of stocks, including energy giants Gazprom and Rosneft, took place under curbs meant to prevent a repeat of the massive selloff on Feb. 24 that came in anticipation of Western economic sanctions.

The significant restrictions on trading Thursday underlined Russia’s economic isolation and the pressure the financial system is under despite central bank efforts to curb market plunges. Foreigners could not sell and traders were barred from short selling — or betting prices will fall — while the government has said it will spend $10 billion on shares in coming months, a move that should support prices.

Russian stocks were only a small part of emerging market share indexes even before the war and only for those with a high risk tolerance, given extensive cronyism, nontransparent accounting and widespread state interference. They lost whatever remaining interest they had for foreign investors when the Moscow Exchange was dubbed “uninvestable” about a week into the war.

Tim Ash, senior emerging markets sovereign strategist at BlueBay Asset Management, said reopened trading was “deeply managed” and suggested that “for those Russians with some spare cash, there is nothing much else to buy as hedge to inflation and currency collapse.”

The benchmark MOEX index gained 4.3% as some companies partially recovered losses from the plunge on the day of the invasion. Airline Aeroflot bucked the positive trend by losing 16.4% — not a surprise after the U.S., European Union and others banned Russian planes from their airspaces.

A U.S. official called the severely restricted market a “charade,” with only some listed shares trading and Russia making clear it would “pour government resources into artificially propping up the shares of companies that are trading.”

“This is not a real market and not a sustainable model, which only underscores Russia’s isolation from the global financial system,” Daleep Singh, a deputy national security and economic adviser to President Joe Biden, said in a statement.

Restrictions like shutting down and restricting the stock market are among those that Russia has taken to shore up the financial system against utter collapse, but they also close off the economy to trade and investment that could fuel growth.

The economic turmoil in Russia from sanctions and the war has been severe. Hundreds of U.S., European and Japanese companies have pulled out of Russia. There have been bank runs and panic buying of sugar and other staples. The exchange rate of Russia’s ruble has tumbled.

Outside Russia, the reopening of stock trading on the Moscow Exchange has little impact. Its market capitalization is a fraction of that of major Western or Asian markets. Plus, foreigners are barred from selling shares under rules imposed to counter Western sanctions.

Moscow’s stock exchange had a market capitalization of about $773 billion at the end of last year, according to the World Federation of Exchanges. That is dwarfed by the New York Stock Exchange, where the total of all equities is roughly $28 trillion.

The central bank estimates that roughly 7.7 trillion rubles, equal to $79 billion, of Russia’s stock was owned by retail investors as of late 2021.

Stocks last traded in Moscow on Feb. 25, a day after the MOEX sank 33% after Russian forces invaded Ukraine. Russia restarted trading in ruble-denominated government bonds earlier this week.

Before the war, the market was mainly of interest to funds investing in emerging market shares. Roughly a week into the conflict, Russia was removed from emerging markets indexes compiled by MSCI, a division of Morgan Stanley. MCSI said that after consultation with a large number of asset managers, it determined the Russian stock market to be “uninvestable.” That took away a primary incentive for fund managers to invest there.

On March 3, the London Stock Exchange suspended trading in shares of 27 companies with links to Russia, including some of the biggest in energy and finance. The shares lost most of their value prior to the suspension.

Rosneft shares dropped from $7.91 on Feb. 16 to 60 cents on March 2. Sberbank plunged from $14.90 to 5 cents.

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