Moscow Stock Exchange: Caught in the middle
The Moscow Stock Exchange MICEX-RTS (MOEX) was formed in December 2011 from a merger between the Moscow Interbank Currency Exchange (MICEX) and the Russian Trading System (RTS), formed in 1992 and 1995 respectively. The MICEX was established by the Russian Central Bank, the country’s largest commercial bank.
The merger between MICEX and RTS was part of Russia’s plan to make Moscow an international financial centre. The merger made the exchange the largest in Russia, trading equities, bonds, derivatives, precious metals, money markets and foreign currency. The exchange launched spot trading for gold and silver in 2013.
The MOEX operates the National Settlement Depository, Russia’s central securities depository, launched in November 2012, as well as the National Clearing Centre, its largest clearing service provider.
The exchange does not have any regulatory powers of its own. The Central Bank of Russia’s Financial Markets Service, which supervises the country’s financial markets, regulates the exchange.
The Moscow Stock Exchange held a $500m initial public offering (IPO) in February 2013, the largest IPO held in Moscow exclusively at that time. The offering was oversubscribed more than two times over and attracted interest from international institutional investors looking to gain exposure to the Moscow stock market.
Listed companies and other indices
There are more than 200 Moscow Stock Exchange listed companies, including the country’s largest airline, Aeroflot. Its largest companies by revenue are Gazprom, oil producers Lukoil and Rosneft, financial services company Sberbank, and internet giant Yandex.
The primary Moscow Stock Exchange Index is the MOEX Russia Index, which was known as the MICEX Index until December 2017. The rouble-denominated MOEX is a capitalisation-weighted composite index that tracks the performance of the 50 largest companies listed on the exchange from 10 main economic sectors.
Other indices include the MOEX Blue Chip (MOEXBC) Index of the 15 most liquid stocks on the exchange based on their weighting in the main index, and the unweighted MOEX 10 Index of the 10 most liquid stocks. The exchange also has sector indices such as the MOEX Oil and Gas Index, MOEX Electric Utilities, MOEX Telecommunication Index and MOEX Consumer Index.
The exchange’s primary trading hours are 09:50 to 18:39 Moscow Standard Time (UTC +3) from Monday to Friday, with pre-market trading from 07:00 to 09:50 and after-hours trading from 19:00 to 23:50. The market is closed on Russian public holidays. The exchange launched after-hours trading for the 25 most liquid shares in June 2020 and added all the remaining stocks on the MOEX Russia Index in August 2020.
MOEX news
In the third quarter of 2021, the Moscow Stock Exchange launched trading in global stocks in US dollars in addition to roubles. The MOEX also started accepting global equities as eligible collateral, offering market participants more flexibility to fund operations and facilitate additional trading activity. The market had around 500 global equities trading on its platform by the end of 2021.
Russian stock market news is typically driven by energy prices, given that Russia produces around 10% of global oil and natural gas. It also tracks global macroeconomic trends, such as GDP growth and interest rates.
International institutional and retail investors have been interested in investing in Russian stocks in recent years as a way to gain portfolio diversification and profit from Russian economic growth. Together with Brazil, India and China, Russia forms the BRIC countries – which are among the largest emerging markets. The MOEX has been broadly trending higher since the late 1990s, with the exception of the 2008 global financial crisis and the 2020 crash at the start of the Covid-19 pandemic.
The MOEX’s annual revenue surpassed RUR50bn ($367m) in 2020, with net profit totalling RUR25bn.
The Russian stock market performance was strong in 2021, with the MOEX repeatedly setting new all-time highs as oil prices climbed, benefitting its largest constituent companies. The number of retail investors increased as the economy showed signs of recovering from the pandemic. MOEX reported that it registered more than six million new individual brokerage accounts in the first 10 months of 2021, bringing its total to 15 million.
The MOEX index reached a high of 4,292.68 on 14 October 2021, for a year-to-date gain of more than 30%. The index subsequently fell sharply in November amid concerns about a build-up of Russian military on the border with Ukraine, as well as a rise in cases of Omicron, a variant of Covid-19. Investors also became increasingly cautious about the impact of the US Federal Reserve’s monetary tightening policy and the outflow of investment from emerging market assets.
A Reuters poll in November 2021 showed a consensus Russian stock market forecast that the MOEX would rise to 4,100 by mid-2022, up from 3,879.54 on 1 December.
Prior to February 2022, the Russian stock market capitalisation was around $773.03bn, compared with a $28.2trn market cap for the New York Stock Exchange (NYSE). The MOEX ranks among the 20 largest exchanges in the world by trading volume and total market cap of traded shares, as well as among the 10 largest derivatives exchanges.
Impact of the war in Ukraine
The Russian stock market effectively collapsed after the invasion of Ukraine on 24 February. The MOEX Russia Index plunged by 33% in one day, shedding $189bn in value. The sell-off was the worst to hit a stock exchange with a value above $50bn since the Black Monday crash in 1987.
The Bank of Russia initially banned short sales on the stock market and subsequently ordered the Moscow Stock Exchange to suspend trading and settlement until further notice to prevent equities and other assets from crashing further. Sanctions imposed by the international community in the days following the invasion cut the country off from the global financial system and the value of the ruble collapsed.
The Moscow Stock Exchange was suspended from the World Federation of Exchanges, the global industry association for stock exchanges and clearing houses. The Federation of European Securities Exchanges (FESE) also voted to exclude the Moscow Exchange, removing its observer member status.
Foreign investment funds held 86% of the free float of the Russian stock market at the end of 2021. On 1 March, Russian President Vladimir Putin reportedly signed an order to temporarily prevent foreign investors from selling their Russian assets.
While the Moscow Exchange closed, Russian securities listed on the London Stock Exchange (LSE) continued trading and lost more than 90% of their value. The LSE suspended trading in its Russian-listed securities on 4 March “to maintain orderly markets”. The NYSE and Nasdaq also halted trading of Russia-based company stocks.
Global stock market index providers such as MSCI also removed Russian equities from their indices and several Russia-focused exchange-traded funds (ETFs) halted trading, including the VanEck Russia ETF, the largest ETF investing in Russia, and the BlackRock iShares MSCI Russia ETF, after they each fell by more 60%. MSCI removed Russian stocks from its emerging markets indices with effect from 9 March 2022.
“Since the Russian invasion of Ukraine on 23 February, Russian assets have become uninvestable,” said Nicholas Field, emerging markets strategist and fund manager at Schroders, in a Russian stock market analysis. “Currency and equity markets in Russian assets are actually or effectively closed. What prices have been available for foreign traded Russian equity show a mark down to virtually zero value.”
When considering whether to invest in the Moscow Stock Exchange, you should always do your own research, considering the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking into account such things as the environment in which it trades and your risk tolerance. And never invest money that you cannot afford to lose.
