Russia’s main stock index tumbled 33 percent on Feb. 24, the day Russian President Vladimir Putin ordered Ukraine to take military action. The index recovered a fraction of its losses a day later, on Feb. 25, the last trading day before the market closed. Since then, the Moscow Stock Exchange has been suspended from trading.
Russia’s stock market hit its longest break in modern history following the escalation in Russia and Ukraine. Russian stocks moved higher following a partial reopening yesterday (March 24), with the government taking some steps to limit the market’s further losses.
The central bank of Russia said it would resume some stock trading on Thursday from 9:50 am to 2 pm Moscow time. Thirty-three of the 50 stocks in the benchmark MOEX index will be allowed to trade, including those of Gazprom, Sberbank and others. Russia’s central bank also said it would ban short selling of the 33 stocks.
After the opening bell, the MOEX Russia index rose rapidly, and then retreated slightly, closing up 4.4%.
However, it is worth noting that the MOEX Russia index is calculated in RUB (ruble), while the RTS index is calculated in USD (US dollar), which fell only 3.1% at the best time and closed down 9%.
The RTS index fell 9%.
Even if the RTS index fell by 9%, it was much better than the outside world had imagined earlier, because during the market shutdown, the United States and the European Union imposed successive sanctions on Russia, including restricting some Russian banks from using the SWIFT World Bank Financial Telecommunication Society communication system. And the U.S. sanctions on Russian oil and gas, among other things.
The Russian stock market has not collapsed following the resumption of the market. I believe it is not mainly because of restrictions on short selling, but because of Putin’s extraordinary move on the eve of the resumption of the market. Putin announced one day earlier that European purchases of Russian natural gas will be settled in rubles. As soon as the news came out, the price of rubles jumped, and the price of natural gas in Europe soared by 34%. The outside world believes that this move has a significant support for the ruble exchange rate, because Europe has to exchange the ruble to find natural gas. As soon as the ruble stabilizes, Russian stock prices can be counted on because foreign investors are in no hurry to sell.
