The shares of Russia’s two biggest banks soared yesterday after avoiding being delisted from a top emerging markets index as part of the West’s response to the Kremlin’s stance in Ukraine.
The New York-based index provider MSCI Inc decided on Friday last week to keep offering the shares of Sberbank and VTB Group to clients as long as the two state-held giants did not issue any more stock.
VTB’s shares gained 4 percent and those of Sberbank rose more than 3 percent in the opening minutes of trading on Moscow’s main exchange.
Photo: Reuters
The Moscow stock market followed the banks’ lead higher and was up more than 1 percent while the ruble gained half a percent against both the US dollar and the euro.
Russian investors said they now expected the other main exchanges in Europe to follow New York’s lead and keep the two stocks.
“We believe that the risk of two of the heavyweight members of the MSCI Russia being excluded from the index was weighing on the broader Russian market last week, and that the news will therefore provide some relief to the market,” VTB Group’s investment house said in a research note that stressed it might have a conflict of interest in the matter.
“The decision made by the MSCI pioneers the series of announcements expected from other index providers: S&P Down Jones Indices, Vienna Stock Exchange, and the FTSE,” VTB Capital said.
The MSCI Russia index is global traders’ preferred way to access a balanced package of paper that reflects the price of the main Moscow-issued stocks.
MSCI was under pressure to drop the two finance houses as part of a sanctions package unleashed against Russia’s financial, defense and high technologies sectors over the Kremlin’s alleged backing of insurgents in eastern Ukraine.
The index provider said in a statement that it reached its decision after a series of “consultations with the investment community” over concerns that the two banks were now prohibited from issuing new shares on the US and European markets.
MSCI said it had decided not to raise the weight of the two stocks in its Russia index should the banks ignore the restrictions and proceed with a share issue in order to raise more capital.
“Both Sberbank and VTB Bank have officially announced that they do not intend to issue new shares in the near future,” MSCI said.
It added that it would weigh its decision again should VTB and Sberbank announce plans to issue new stock.
Traders said that a delisting threatened to accelerate the pace of investors’ capital outflows from Russia.
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