By Pam Martens and Russ Martens: March 2, 2022 ~
Moscow Stock Exchange (MOEX)
Russian President Vladimir Putin’s invasion of Ukraine, a nation of 44 million people, has been playing out for just seven days. But the losses Putin has suffered on the financial battlefield are already staggering.
As a result of sanctions imposed by the European Commission, the U.S., Canada and the U.K., (that many other countries are now following), investing in anything connected to Russia has become a toxic idea to investors around the globe. As a result, the Moscow Stock Exchange has shuttered stock trading for the third day in a row and it’s been left up to investors to attempt to exit their Russian stocks on the London Stock Exchange.
As of this morning, some of Russia’s largest companies are trading for pennies in London. As of 11:00 a.m. (London time), Russia’s giant energy company, Gazprom, was trading at 3 cents a share, a 99 percent decline from the start of the year. Russia’s largest crude oil exporter, Rosneft, was trading at 96 cents shortly after 12 noon in London.
Russia’s largest natural gas company, Novatek, was trading at 61 cents at 11:30 a.m. London time. Novatek was a $238 stock in London at the beginning of the year.
And, to underscore just how precarious the financial situation is for Russia, its largest bank, Sberbank, which has experienced a bank run on its foreign branches, has been trading all morning in London between a penny and five cents. Sberbank was a $16 stock in London at the beginning of the year.
The largest Russian exchange-traded fund (ETF) that trades in the U.S., the VanEck Russia ETF (RSX), closed yesterday at $8.26. That’s lower than where it traded during the financial crash of 2008 and a 69 percent decline from the beginning of the year.
The prices of Russian stocks in London this morning is a reflection of the fact that liquidity is drying up in anything that has the word Russia connected to it – that includes the Russian currency, the Ruble, which has been plunging in value against the U.S. Dollar since the invasion of Ukraine began on February 24. As of this morning, the Ruble continues to trade at a record low against the U.S. Dollar, now valued at less than one cent.
With foreign debt sales closed to most Russian companies and Russia’s central bank’s assets frozen throughout much of the world as a result of the sanctions, it’s unclear how Putin thinks he can finance and sustain a war against a nation of 44 million people – who have clearly demonstrated over the past seven days that they don’t want him there.
With the Moscow Stock Exchange (MOEX) closed for the third day in a row and its website also down (a Ukrainian hackers’ group has taken credit for that), we went to its Twitter account so see what was going on at the Exchange prior to the invasion of Ukraine. It turns out that the Exchange had plans to become a major international venue for stock trading.
On December 4, 2021 the Exchange had Tweeted:
“On Monday MOEX will launch a morning trading session for equities starting at 7am. The new session means trading on MOEX for FX [foreign exchange], derivatives and stocks will run 17 hours a day.”
Just a few days earlier, MOEX had Tweeted this:
“Tomorrow we will add 80 more international stocks to our platform, bringing the total number of global securities available to trade on MOEX to more than 500. Investors can trade in either RUB or USD.”
Now the Moscow Stock Exchange can’t open – because it would reveal to the citizens of Russia just how badly Putin is losing the war on the financial battlefield.
More major corporations also announced yesterday that they would cease doing business with Russia or halt shipments of their products to Russia. WarnerMedia said it was “pausing” the release of “The Batman” in Russia as a result of Russia’s invasion of Ukraine. The film is expected to be one of the biggest blockbusters of the year. Disney had announced on Monday that it would stop theatrical releases in Russia.
ExxonMobil announced yesterday that it would exit its Russian oil and gas operations. In a statement, it said:
“ExxonMobil supports the people of Ukraine as they seek to defend their freedom and determine their own future as a nation. We deplore Russia’s military action that violates the territorial integrity of Ukraine and endangers its people.
“We are deeply saddened by the loss of innocent lives and support the strong international response. We are fully complying with all sanctions.”
Apple also announced yesterday that it was halting sales of its products to Russia and restricting access to Russian news apps. (Many news outlets in Russia are state-owned.)
For the other major corporations that have severed ties with Russia since its invasion of Ukraine, see our reporting here.
