Russian stocks give up gains in second day of limited trading

Russian equities erased earlier advance and fell during the second day of limited trading after a record-long shutdown of the country’s stock market.

The MOEX Russia Index was down 2.9% by 12:18 p.m. in Moscow after earlier rising as much as 3.3%. Gas giant Gazprom PJSC led losses after the U.S. and the European Union reached a deal to cut dependence on Russia for liquefied natural gas.

The gauge had climbed 4.4% in Thursday’s shortened session as the Russian government took measures, including preventing foreigners from exiting local equities and banning short selling, to avoid a repeat of the 33% slump seen on the first day of the Ukraine invasion last month. Russian equities are the world’s worst performers so far this year. 

Russia is slowly reopening its equity trading after suspending it from Feb. 28 until yesterday after the nation was hit with unprecedented sanctions, spanning everything from its ability to access foreign reserves to the SWIFT bank-messaging system. 

The Moscow Exchange is holding trading in 33 shares on the MOEX index, while stocks outside the benchmark are trading in a special negotiated mode. Oil producer Lukoil PJSC dropped today with crude prices and lender Sberbank PJSC also slipped, while fertilizer producer PhosAgro PJSC gained.

“Yesterday, the main theme was hot money searching for tactical buying,” said Dmitry Polevoy, an analyst at Locko-Invest in Moscow. “Today, we see some selling plus more activity from people who stayed aside yesterday seem to be driving the move.”

“Price-discovery will take time as it is hard to correctly assess new fair prices. The sanctions story is still open-ended.”

Some market participants have warned against reading too much into this week’s market moves since foreigners, who were restricted from selling, hold more than half of the Russian stock market’s free float. The White House slammed the partial resumption of the equities trading, calling it a “Potemkin market opening,” saying it’s not a real market.

Still, some say local retail traders could be buying shares as an inflation hedge, and the Moscow Exchange said the share of individual investors in Thursday’s trading volume was 58%. 

The ban on sales by foreigners shielded the local stock market from a deeper rout after the nation’s equities were excluded from global benchmarks and exchange-traded funds tracking the country’s shares were frozen. European companies with business exposure to the country have lost more than $100 billion in market value since the war risks surged and Russian companies’ global depositary receipts slumped more than 95% before being halted.