Russia's economy is crumbling even as its stock market reopens

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 Russian economy from stiff Western sanctions.

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 American and European 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

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 a 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.

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.


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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.

Outside Russia, the reopening of stock trading on the Moscow Exchange has little impact. Its market capitalization, or the total value of its public companies’ shares, is a fraction of that of major Western or Asian stock 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 value of all equities is roughly $28 trillion.

Devastating toll

Still, the restarting of trade on the MOEX is unlikely to help most Russians as the toll of financial sanctions and reduced trade devastates the country’s economy. The Institute of International Finance, a trade group that represents major financial firms, this week forecast a 15% drop in Russia’s growth this year because of the war in Ukraine 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,” IIF said in a report

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.

Goldman Sachs analysts expect slightly less damage to Russia’s economy, projecting a still painful 10% decline in the country’s gross domestic product. The conflict is also hurting global economic growth, with the New York-based bank lowering its forecast for global GDP this year to 3.2%

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