Wild moves in Russian stocks as market reopens after monthlong shutdown

March 25, 2022: -On Thursday, Russia’s stocks moved sharply, as the market partially reopened for limited trading after its most extended shutdown since the fall of the Soviet Union.

On Wednesday, the Moscow Exchange resumed trading in 33 Russian equities, including some of its biggest names such as Gazprom and Sberbank, between 10 a.m. and 2 p.m. Moscow time following an announcement from the Central Bank of Russia.

However, short-selling on stocks will be banned, and foreign investors will not be able to sell stocks or OFZ ruble bonds until April 1.

The MOEX Russia Index finished trading up 4.37%, paring earlier gains of more than 10%.

Oil giants Rosneft and Lukoil increased 16.97% and 12.41%, respectively, while aluminum company Rusal climbed 15.81%. Norilsk Nickel gained 10.17%.

At the other end of the index, Shares of Russian airline Aeroflot initially plunged more than 20% but retraced a few of its losses to close 16.44% lower.

The country’s stock exchange had been closed since February 25 as Russian assets plunged across the board following the country’s invasion of Ukraine and in anticipation of the punishing international sanctions that followed.

Jeroen Blokland, founder and head of research at Dutch investment firm True Insights, said in a tweet on Thursday that investors were going back into Russian stocks “perhaps based on the idea that valuations will revert to pre-war levels.”

“But this is unlikely to happen. It’s tough to assign fundamentals, but we know that (self) sanctions will remain for a very long time,” Blokland added.

On Wednesday, the Institute of International Finance projected that the Russian economy would contract by 15% in 2022 due to the war in Ukraine, particularly noting the “self-sanctioning” of foreign companies as a contributing factor.

The IIF said domestic demand in Russia would fall sharply, with a “collapse in imports” offsetting a decline in exports.

“Together with a decline of 3% in 2023, this will wipe out fifteen years of economic growth. Although, the impact on medium- and long-term prospects is likely to be even more severe,” the D.C.-based international industry body said.

The report added that a “brain drain” and low investment would “weigh heavily” on already-subdued potential growth.