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Topline
Though Russia’s central bank closed the Moscow Stock Exchange on Monday, a number of Russia-focused funds trading in the United States crashed Monday, reflecting hundreds of millions of dollars in market value wiped from Russian stocks as international sanctions against the country prompted experts to reconsider the viability of investing in its market.
Russia-focused funds plummeted 25% Monday as individual stocks crashed as much as 75%.
© 2018 Bloomberg Finance LP
Key Facts
After the nation’s currency plummeted to a record low in morning trading, Russia’s central bank announced Monday it would close the Moscow Stock Exchange, the nation’s largest trading group, until March 5 as it “assesses the feasibility” of reopening “depending on the development of the situation.”
Though some 200 stocks didn’t trade on the Moscow Stock Exchange Monday, a handful of Russia-focused exchange-traded funds, which track baskets of stocks in the country, still traded in the U.S.—with the VanEck Russia ETF and iShares MSCI Russia ETF, the two largest with about $1 billion and $350 million in assets, respectively, cratering about 25% apiece.
Without active trading in Russia, Harry Whitton, head of ETF sales trading at Old Mission Capital, told CNBC the prices are largely based on investor sentiment and stock futures, recalling that when Greece closed its markets during six weeks of economic turmoil in 2015, stocks reopened at nearly the same value as the ETFs in the U.S.
Some of the largest stock holdings in the funds include oil giants Gazprom and Rosneft, as well as financial institution Sberbank, whose London-listed shares crashed 74% on Monday.
With hundreds of millions of dollars in market value wiped in the U.S., a top executive at index provider MSCI told Reuters on Monday the Russian market has become “uninvestable,” arguing that removing the nation’s listings from indexes was a “natural next step” if clients and investors can’t transact in the market.
On CNBC Monday, Goldman Sachs analyst Kamakshya Trivedi agreed, saying growing international sanctions punishing Russia for its invasion of Ukraine have made the nation “increasingly uninvestable for global investors,” as measures targeting the central bank’s reserve assets have helped push the ruble down to record lows.
Key Background
The economic fallout since Russian President Vladimir Putin ordered an invasion of Ukraine early Thursday intensified Monday amid a growing list of sanctions targeting the Russian government, businesses and oligarchs. The sell-off on Monday pushed Russian stocks down nearly 50% over the past week, while the nation’s ruble sank to an all time low of nearly 118 against the U.S. dollar in offshore trading. Additionally, oil giant British Petroleum announced Sunday it would be exiting its 19.75% ownership of Rosneft, a state-owned firm that supplies Russia with much of its fuel, after the country’s attack on Ukraine.
Tangent
U.S. markets have also suffered amid the tumult in recent days—albeit not nearly as much. The Dow Jones Industrial average plunged as much as 400 points, or 1%, on Monday, pushing losses to about 6% since the invasion started.
What To Watch For
More sanctions. President Joe Biden and U.S. allies over the weekend pledged to remove some Russian banks from SWIFT, a messaging system that helps financial institutions around the world make transactions. Most recently, the Treasury announced its latest batch of sanctions Monday morning, blocking any American citizen from doing business with Russia’s central bank, finance ministry or National Wealth Fund, and freezing the assets of sanctioned entities in the U.S.
Further Reading
Airbnb, Etsy Join List Of Companies Supporting Ukraine Or Taking Action Against Russia (Forbes)
Live: U.S. Cuts Off Russian Central Bank (Forbes)
U.S. And Allies To Remove Some Russian Banks From SWIFT, Sanction Central Bank (Forbes)
Russian Central Bank Hikes Interest Rate To 20% As Ruble Sinks To Record Low (Forbes)
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