The Russian stock market fell today, wiping out much of Thursday’s rally when the stock market reopened for the first time in nearly a month.
The Moex share index slipped 3.66% today, with all sectors in the red, after gaining 4.4% yesterday.
Limited stock trading resumed yesterday with several restrictions to support stocks, including a ban on short selling and foreign investors selling shares. This helped spark a rally yesterday when oil and commodity stocks surged.
Analysts pointed out that these restrictions meant that the Moscow market was not functioning properly, while the United States called it the “opening of the Potemkin market”.
But despite these measures, the airline Aeroflot fell another 18% today, on top of Thursday’s 16% drop. The sanctions barred its planes from entering EU and UK airspace.
The gas giant Gazprom fell 12%, after the United States and the EC reached an agreement to reduce Europe’s dependence on Russian gas.
steel giant Severstal fell 9%, with reports that the penalties were delaying payment of a loan to its creditors, putting it on the verge of default.
Prior to Thursday, the shares had not traded on the Moscow stock exchange since Feb. 25, the day after Putin sent thousands of troops to Ukraine.
The move led to Western sanctions aimed at economically isolating Russia, which plunged the country into a deep recession.
The ruble denominated Moex is now down 34% so far this year, having plunged when the invasion began in February before trading was suspended. In terms of dollars, it’s almost cut in half.
Dmitry Polevoy, an analyst at Locko Invest in Moscow, told Bloomberg:
“Yesterday the main theme was seeking speculative money for tactical purchases.
Today we are seeing some selling and more activity from people who stayed away yesterday seem to be driving the move.
“Price discovery will take time because it is difficult to properly price new fair prices. The history of sanctions is still open.
With the collapse of the ruble pushing prices higher, some investors may turn to equities for inflation protection.