Russian Markets Set To Reopen; Russia Bans Foreigners From Selling Off Stocks

After a nearly month-long hiatus, Russia expects to resume stock trading on Thursday, with 33 rouble securities to be traded on the Moscow Exchange. Non-residents, on the other hand, will have to wait until April 1 to sell equities and OFZ rouble bonds.

The central bank announced on Wednesday that trading in blue chips, including state lenders Sberbank and VTB, as well as oil heavyweights Rosneft and Gazprom, will take place between 0650 and 1100 GMT, with short-selling prohibited.

On February 25, Russian stocks were last traded on the Moscow Exchange. As a result of the market turbulence caused by Western sanctions over the events in Ukraine, the central bank halted trading.

Foreign investors are allowed to perform operations to reduce their commitments until April 1st, including repo deals and derivative instrument deals, but not to sell shares or OFZ rouble treasury bonds, according to the Moscow Exchange.

When the central bank reopened on Monday, it began buying OFZ rouble treasury bonds to strengthen the local debt market, and the finance ministry indicated it expects to spend 1 trillion roubles buying Russian company shares.

MOEX’s limited reopening comes after Russia’s second-largest stock exchange, the SPB Exchange, partially reopened foreign stock trading on Monday, allowing trading of the 15 most liquid equities, including Apple, Amazon, Boeing, and Alphabet.

SPB Exchange began allowing domestic market players, the majority of whom are Russian residents who use the platform to trade foreign stocks, to buy and sell assets of additional 1,639 foreign businesses at midday on Wednesday.

Trading and settlement are handled in US dollars, but the monies will remain in brokerage accounts and will not be able to be cashed out due to Western sanctions on Russia and capital controls imposed in response by Moscow, according to the exchange.

On Monday, trading in OFZ government bonds resumed, with the central bank purchasing OFZ papers in an effort to reduce volatility.

 On Monday, yields on various OFZs, notably benchmark 10-year government bonds, surged to about 20 per cent, or the central bank’s benchmark interest rate, before settling between 14 per cent and 17 percent in the following days. 

According to Univer Capital, a mid-sized Russian brokerage that was forced to sell OFZs it held on behalf of its clients by Russia’s National Clearing Center on Monday, volatility has left certain participants vulnerable to losses (NCC).

Falling OFZ prices, which move inversely to rates, sparked margin calls and a liquidity shortage at Univer Capital, according to Artyom Tuzov, executive director of the capital markets department.

“NCC has blocked the company’s trading limit and… is selling (our OFZ) assets as a result. The trading limit will be unblocked after (mandatory) sale is over,” Tuzov told Reuters.

According to an internal Univer Capital note obtained by Reuters and corroborated by Tuzov, NCC was selling OFZs held by Univer Capital at yields ranging from 17 per cent to 20 per cent, compared to 15 per cent on average on the market that day.

According to the document, roughly a hundred of Univer’s clients suffered damages totaling 174 million roubles ($1.7 million).

“All operations by NCC are aimed at limiting systematic risks so issues of a single brokerage do not spill over on the overall market,” the Moscow Exchange, parent company for NCC, said in a statement.

(Adapted from Reuters.com)



Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy

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