Billions of US dollars in cash are at risk of being trapped, stock funds have plunged and capital controls are choking off money flows. Russia has all the hallmarks of an uninvestable market for global investors.
Russia-focused equity funds have tumbled 23 percent on average in the past week, data compiled by Bloomberg showed.
Bonds have plummeted as default risks intensified and trading the ruble has become a Herculean task, with brokers stepping back from dealing with the currency.
Photo: Bloomberg
“The calamity of Russia’s war in Ukraine has put an end to international financial investing in Russia,” said Christopher Granville, managing director for Europe, the Middle East and Africa, and global political research at TS Lombard in London.
The past few weeks have seen a dramatic U-turn from earlier in the year when Russia’s economy was benefiting from surging oil prices, with stocks hitting record highs and the ruble a popular carry-trade target.
Now, the blizzard of sanctions placed on the country in response to Russian President Vladimir Putin’s invasion of Ukraine is causing money managers to fear that the financial damage will last for years.
Index providers are assessing the country’s accessibility, with MSCI Inc seeking feedback on whether to remove Russia from its stock and bond indices.
Intercontinental Exchange Inc said it would remove debt issued by sanctioned Russian entities from its fixed-income indices at a rebalancing exercise on March 31.
“Russia has become not just uninvestable for new capital, but will trap legacy foreign capital parked in Russia,” said Hasnain Malik, a strategist at Tellimer in Dubai.
Overseas investors owned about US$86 billion of Russian equities at the end of last year, Moscow Exchange data showed. Most are now unable to liquidate or properly trade their holdings after Moscow banned brokers from selling securities held by these funds.
Almost US$13 billion of Russian stocks owned by US and Europe-based funds is in sanctioned companies, Bloomberg Intelligence estimates.
In fixed income, BlackRock Inc, Capital Group Cos and Legal & General Group PLC are the top holders of Russia’s US dollar debt and investors have about US$250 billion tied up in bonds issued by companies, according to data compiled by Bloomberg.
US-listed VanEck Russia ETF, among the largest passive funds with exposure to Russia, and the iShares MSCI Russia Capped ETF slumped close to 30 percent on Monday alone.
Meanwhile, JPMorgan Chase & Co and Danske Bank A/S are among asset managers that have frozen funds with exposure to Russian equities.
The ruble slumped 12 percent against the US dollar on Monday in local trading, and although gaining about 2 percent early yesterday, it is still down more than 20 percent this year, the worst-performing currency globally.
Russia’s central bank might be “preparing for a run on the ruble now that their ability to resort to their FX reserves has been eroded by the international sanctions,” said Valentin Marinov, strategist at Credit Agricole in London.
Bank of Russia Governor Elvira Nabiullina acknowledged for the first time that sanctions imposed on the central bank meant she could not intervene to keep the ruble from collapsing on Monday.
However, what she did not say is how much money she still has — in case the bank is called into action.
Wielding the world’s fifth-largest stockpile of foreign exchange only days ago, the central bank lost at least half of its stash with the stroke of a pen last weekend, the EU’s top diplomat said.
In the view of the Institute of International Finance, about 40 to 50 percent of Russia’s reserves — last officially estimated at US$643.2 billion in the middle of last month — are potentially out of reach.
Russia’s stock markets were closed for a second day yesterday and an announcement on whether trading would go ahead on today was expected later.
“Capital controls are now in place, so why invest if you can’t get your money out?” said Jonathan Cavenagh, senior markets strategist at Informa Global Markets in Sydney. “There’s way too many unknowns.”
Sweeping policy changes under US Secretary of Health and Human Services Robert F. Kennedy Jr are having a chilling effect on vaccine makers as anti-vaccine rhetoric has turned into concrete changes in inoculation schedules and recommendations, investors and executives said. The administration of US President Donald Trump has in the past year upended vaccine recommendations, with the country last month ending its longstanding guidance that all children receive inoculations against flu, hepatitis A and other diseases. The unprecedented changes have led to diminished vaccine usage, hurt the investment case for some biotechs, and created a drag that would likely dent revenues and
Macronix International Co (旺宏), the world’s biggest NOR flash memory supplier, yesterday said it would spend NT$22 billion (US$699.1 million) on capacity expansion this year to increase its production of mid-to-low-density memory chips as the world’s major memorychip suppliers are phasing out the market. The company said its planned capital expenditures are about 11 times higher than the NT$1.8 billion it spent on new facilities and equipment last year. A majority of this year’s outlay would be allocated to step up capacity of multi-level cell (MLC) NAND flash memory chips, which are used in embedded multimedia cards (eMMC), a managed
CULPRITS: Factors that affected the slip included falling global crude oil prices, wait-and-see consumer attitudes due to US tariffs and a different Lunar New Year holiday schedule Taiwan’s retail sales ended a nine-year growth streak last year, slipping 0.2 percent from a year earlier as uncertainty over US tariff policies affected demand for durable goods, data released on Friday by the Ministry of Economic Affairs showed. Last year’s retail sales totaled NT$4.84 trillion (US$153.27 billion), down about NT$9.5 billion, or 0.2 percent, from 2024. Despite the decline, the figure was still the second-highest annual sales total on record. Ministry statistics department deputy head Chen Yu-fang (陳玉芳) said sales of cars, motorcycles and related products, which accounted for 17.4 percent of total retail rales last year, fell NT$68.1 billion, or
In the wake of strong global demand for AI applications, Taiwan’s export-oriented economy accelerated with the composite index of economic indicators flashing the first “red” light in December for one year, indicating the economy is in booming mode, the National Development Council (NDC) said yesterday. Moreover, the index of leading indicators, which gauges the potential state of the economy over the next six months, also moved higher in December amid growing optimism over the outlook, the NDC said. In December, the index of economic indicators rose one point from a month earlier to 38, at the lower end of the “red” light.
RSS