Russian shares traded abroad plunge as sanctions trigger ‘panicky’ selling


Russian stocks traded in the UK and the US plunged further in the wake of western sanctions on Wednesday, leaving some almost worthless.

An MSCI index tracking Russian stocks trading in London and New York had fallen close to 67 per cent by midday in the UK and is down nearly 96 per cent so far this year. London-listed shares in Sberbank, Russia’s biggest lender, fell more than 90 per cent on Wednesday, while state-owned Gazprom tumbled 85 per cent and Novatek declined 96 per cent.

The ruble also drew a fresh wave of selling, leaving it down by one-third in 2022.

“What you’re seeing now is foreign investors panicking and selling anything related to Russia,” said Jacob Grapengiesser, partner and head of Eastern Europe at fund manager East Capital. “Lots of banks have stopped trading altogether, even if there are prints on the screen.”

Line chart of MSCI Russian ADR / GDR index showing Russian shares traded abroad are in freefall

Trading of stocks on Moscow’s Moex index has been suspended this week, yet London and New York-based depositary receipts – bank certificates that securitize the ownership of shares – remain open.

“Lots of brokers are just outright cutting access to their clients to buy or sell Russian GDRs,” said Luis Saenz, head of international distribution at Sinara, a Russian investment company. “Sberbank is trading at 0.1 cents but it’s obviously not tradeable. . . it’s incredible. ”

The sharp declines in Russian stocks come as western countries have launched a barrage of sanctions on people and businesses close to President Vladimir Putin. Severstal, one of Russia’s biggest steel producers, was forced on Wednesday to halt supplies to Europe because of sanctions leveled at its main shareholder, Alexei Mordashov. Sberbank has also closed all operations in Europe.

Traders said attempts to unwind clients’ positions in Russian stocks were hobbled by confusing sanctions demands. For example, the UK Treasury has frozen the assets of VTB, but its sanctions implementation unit granted a 30-day grace period to allow traders to wind down positions involving the Russian bank. On Tuesday the UK’s markets regulator, the Financial Conduct Authority, suspended trading in the global depositary receipts on the London Stock Exchange.

“We’ve had updates upon updates, the EU, US and UK sanctions are not fully synched,” Saenz said. “I’ve been getting calls on Sberbank every 10 minutes, you can’t own VTB. . . brokers are not allowing people to even touch it. ”

Investors including JPMorgan Asset Management, UBS Asset Management and BlackRock have suspended Russian-exposed funds with billions of euros in combined assets since the conflict in Ukraine began last week, leaving investors unable to withdraw money.

Foreign investors in Russian ruble-denominated bonds also found themselves unable to exit their positions after Euroclear, a clearing house, stopped accepting payments in the currency on Tuesday.



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