Russia’s Economic Collapse – Stock Market Restart
The Russian stock market opened on Thursday under severe restrictions for regional trade. For the first time since Moscow invaded Ukraine, a month later. Prices fell, and the market closed as a means of isolating the Russian economy from harsh Western sanctions. Trading in a limited number of shares, including energy giants Rosneft and Gazprom, has been restricted to avoid massive sales on February 24 in anticipation of US and European economic sanctions.
Significant trade restrictions on Thursday underscored Russia’s economic isolation and pressure on the financial system, despite attempts by the central bank to curb market downturns. Foreigners could not sell. At the same time, traders were banned from short sales. The government said it would spend $10 billion on stocks in the coming months. This is a step that will boost prices. According to strategists, the reopened trade was intensely managed. Consequently, there is likely nothing else to buy for those Russians who have spare cash but a collapse in inflation and currency.
Economy of Russia
The benchmark MOEX index gained 4.3%. Some companies partially recovered from the loss on the day of the invasion. Aeroflot broke the positive trend and lost a total of 16.4%. This is not surprising since the United States, the European Union, and others have banned Russian planes from entering the airspace.
The stocks last traded in Russia on February 25. One day after, MOEX fell 33%; After Russian troops invaded Ukraine. Earlier in the week, Russia resumed trading in ruble-denominated government bonds. Russia says it will spend government resources artificially boosting the stocks of companies it trades.
Outside of Russia, the opening of stock exchanges on the Moscow Stock Exchange has little impact. Market capitalization, or the total value of shares in public companies, is part of major stock markets in the West or Asia. In addition, foreigners are prohibited from selling shares by the rules imposed by Western sanctions.
At the end of last year, the Moscow Stock Exchange market capitalization was about $773 billion. This is hampered by the New York Stock Exchange, where the total value of all the shares is about $28 trillion.
Still, resuming trading on the MOEX is unlikely to help most Russians. Financial sanctions and reduced trade are destroying the country’s economy. The International Finance Institute, a trading group representing major financial firms, forecast a 15% drop in Russian growth this week due to the Ukraine war this year; And another 3% in 2023. Experts predict that current events will erase about 15 years of economic gains.
Hundreds of American, European, and Japanese companies have left Russia. Goldman Sachs analysts expect slightly less damage to the Russian economy, With a forecast of a still painful 10% decline in the country’s gross domestic product. Conflict also hurts global economic growth. The New York-based bank cut its global GDP forecast to 3.2%.
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