Russia seeks to prevent investors from trampling as sanctions hit the economy

Russian Prime Minister Mishustin chairs a meeting on economic issues in Moscow
FILE PHOTO: Russian Prime Minister Mikhail Mishustin chairs a meeting on economic issues via a video link in Moscow, Russia March 1, 2022. Sputnik / Alexander Astafyev / Pool via REUTERS

March 2, 2022

By Carolyn Cohn and Lawrence White

LONDON (Reuters) – Russia said on Tuesday that it was placing temporary restrictions on foreigners seeking to exit Russian assets, as it tries to prevent investor retracement due to the orders. Western sanctions imposed for the invasion of Ukraine.

Russian assets were in free fall on Tuesday with London-listed joint ventures MSCI Russia ETF falling 33% to a new record low and Russia’s largest lender, Sberbank falling to 21 cents compared with the dollar from just under $9 before the invasion.

Major money managers, including hedge fund Man Group and British wealth manager abrdn, cut their positions in Russia even as the ruble fell to record lows and traded in bonds frozen.

Top asset manager BlackRock Inc said on Tuesday that it is consulting with regulators, index providers and other market participants “to help ensure our clients can exit from their position in Russian securities” if allowed.

“There is certainly a willingness from asset managers and benchmark providers to exclude Russia from their portfolios,” said Kaspar Hense, a senior portfolio manager at Bluebay Asset Management in London. their investments and indexes.

“The big question is where do buyers show up?”

Two people with knowledge of the matter told Reuters that Austria’s Raiffeisen Bank (RBI) is also looking to leave Russia, a move that could make it the first European bank to do so since invading Ukraine. – which Moscow calls “special operations. The RBI said it has no plans to leave Russia.

Russian Prime Minister Mikhail Mishustin announced that the country will temporarily prevent foreign investors from selling Russian assets to ensure they make a deliberate decision, but did not give details.

Moscow’s move to impose capital controls means that billions of dollars of securities held by foreigners in Russia are at risk of being trapped.

“It’s been a rollercoaster of hell,” said a London-based hedge fund manager that invests in European financial firms, who declined to be named. indirect contact with Russia.

British asset manager Liontrust has suspended trading in its Russia-based fund, while the prices of some of the most popular Russia-focused exchange-traded funds are trading at a discount to asset values. their net worth.

Ratings agency Fitch has identified 11 Russia-focused funds that have been suspended, with total assets under management of 4.4 billion euros ($4.9 billion) at the end of January, a spokesperson said. by email.

US-listed exchange-traded funds that track Russian stocks have come under intense selling pressure in recent days, with the Vaneck Russia ETF sliding 24% on Tuesday.

One fund, Direxion’s Russia 2x ETF, attracted a wave of options trading after the issuer said it would cease trading on March 11 due to high volatility and restrictions on securities Russia.


In just a few weeks, Russia has transformed from a lucrative bet on high oil prices to an uninvestable market with a central bank embargo, major banks shutting down the global payments system SWIFT and Capital controls clog up cash flow.

SWIFT on Tuesday said it was waiting to see which banking authorities wanted to disconnect from its financial messaging system when the sanctions were in place.

Visa Inc and Mastercard Inc have blocked many Russian financial institutions from their networks, and Germany’s market regulator BaFin says it is closely monitoring the European branch of Russia’s VTB Bank, which is no longer available. accept new customers.

Shares of some European banks remained under pressure after falling sharply on Monday as lenders’ exposure to Russia and the European banking sector fell 3% on Tuesday.

Property chief abrdn has about two billion pounds of client money invested in Russia and Belarus and has had his positions cut, Chief Executive Stephen Bird said.

“We will not invest in Russia and Belarus for the foreseeable future,” says Bird.

The group’s chief financial officer, Antoine Forterre, told Reuters on Tuesday.

Shares of Raiffeisen were down 11.3% in the early afternoon, after sliding 14% on Monday. Shares of Italy’s UniCredit fell 2.5%, following a 9.5% drop on Monday.

The European Central Bank has placed banks with close ties to Russia, such as Raiffeisen and the European branch of VTB, under close supervision, two sources told Reuters.


Tuesday’s share price move and investor comments come as Russia faces growing isolation over its actions in Ukraine, with resistance grounded in denials. decisive early interests of President Vladimir Putin.

In recent days, the United States, Britain, Europe, Canada and other countries have announced a series of new sanctions.

The London Stock Exchange on Tuesday said it would stop trading two global depository receipts (GDRs) for VTB Bank after Britain’s financial regulator suspended them in response to sanctions. .

The German stock exchange operator has extended the securities it will no longer trade with bonds issued by Russia.

India’s top lender will not process any transactions involving Russian entities subject to international sanctions, according to a letter obtained by Reuters and people familiar with the matter. know.

(Additional reporting by Frank Siebelt, Huw Jones, Madeline Chambers and Iain Withers; Writing by Tom Sims and Saikat Chatterjee; Editing by Mark Potter and Stephen Coates) Russia seeks to prevent investors from trampling as sanctions hit the economy

Caroline Bleakley

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