Russia is no stranger to scandals. However, it is impossible to compare its actions in Ukraine with any scandals. Its decision to invade Ukraine created numerous challenges at home and abroad. The country is breaking traditional market rules. Russia’s stock market reopened on Thursday after it was shuttered last month.
Under normal circumstances, there wouldn’t be much demand for shares in companies from Russia considering they do most of their business in an economy that suffered serious losses. Moreover, some expect the local economy to contract by more than 20% this year.
Surprisingly, the benchmark MOEX index gained 10% in early trading. Russian companies have to deal with a lot of problems. Many people would like to know why someone would invest in Russian companies after taking into account all problems. However, Russia’s stock market isn’t operating under normal rules. The country’s central bank blocked foreign investors from selling their shares and banned short selling. Moreover, only 33 stocks were allowed to trade on Thursday.
Russia and foreign companies
Foreign funds used to dominate the Moscow Exchange. For example, they held more than 80% of shares trading on the Moscow Exchange in the first half of the last year. Importantly, the United States and Canada accounted for 54% of the total, with 22% from the United Kingdom and 21% from the rest of Europe.
The White House wasn’t very impressed with the “reopening”. As stated earlier, Russia is breaking traditional market rules. The situation regarding the Moscow Exchange is only part of the problem. On Wednesday, Russia’s longtime leader Vladimir Putin said that “unfriendly” countries would have to pay for gas from Russia in rubles.
That’s not going to go down well with countries, as well as companies, that have contracts stipulating they will pay for gas in euros or U.S. dollars. Germany is not happy with Russia’s position. The country’s government argued that any demand to pay for gas in rubles would represent a breach of contract.
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