MSCI, FTSE Russell cut Russian equities from indices

Dzurag/iStock via Getty Images

More damaging news keeps flowing in for Russian markets as MSCI (NYSE:MSCI) and FTSE Russell (OTCPK:LDNXF) cut the nation's equities out of their widely-tracked indexes. The decision followed two days of deliberations, in which the "overwhelming majority" involved in the consultation had reported that "the Russian equity market is currently uninvestable." The Moscow Stock Exchange will be closed for the fourth consecutive day on Thursday, while hundreds of millions of dollars in market value of Russia-based stocks and ETFs have already been wiped out in the U.S.

Bigger picture: International sanctions punishing Russia for its invasion of Ukraine have seen a slew of Western companies pull out of Russia, while measures targeting the central bank's reserves have pushed the ruble to record lows. The latest? Boeing and Airbus have suspended parts and maintenance support for Russian airlines, adding further barriers to continue operating their fleets, while Mercedes-Benz discontinued deliveries to the country. Apple has also halted product sales in Russia, while the tech giant, Google and Spotify have removed all content from Kremlin-backed RT and Sputnik from their platforms.

The move by MSCI, which estimates about $16T are linked to its indices, comes after rating agencies Fitch joined S&P Global in cutting Russia's sovereign debt rating to junk. "Developments will weaken Russia’s external and public finances, severely constrain its financing flexibility, markedly reduce trend GDP growth, and elevate domestic and geopolitical risk and uncertainty," Fitch wrote in a statement. Moody's Investors Service followed shortly thereafter, downgrading Russia's credit ratings deep into junk territory.

Commentary: "Russian assets have become toxic, for a lack of better expression," explained Marek Drimal, a strategist at Societe Generale. "Onshore markets are barricaded and basically uninvestable, while offshore markets have been hammered. The speed of events as they are happening is just mind-boggling."

Comments

[Arch_Duke_Ferdinand]

Ukraine's war reminds me of the start of WWI. Events started to spend out of control over 32 days slowly.
I hope President Biden isn't sailing on the Chesapeake Bay with Commander.

[Jeff McGinn]

Never seen anything like this

[RandyFloyd]

so even russian equities have been cancelled. I personally can't help but think there's a lot more to this story than "Russia bad, Putin bad". I'm NOT siding with anyone here, obviously Putin is a dangerous man, but the propaganda has been off the charts.

I heard an interview with David Stockman yesterday who likened the situation to the cuban missile crisis... Putin just doesn't want NATO's guns on Russia's door. Stockman stated that Putin attempted to settle this diplomatically but was stonewalled.

I don't know exactly what's going on, but I can say for sure but I don't trust the lying media one bit. Let's see how long this comment lasts on SA...

[Yggsdraggl]

@RandyFloyd True fact: If and when Putin absorbs Ukraine, he will STILL have NATO on his borders. And now Finland might join the alliance.

[det.sci]

@Yggsdraggl Right, he's just expanding out to the same problem at a different border

[taxman100]

@Yggsdraggl He's concerned about NATO tanks being 300 kilometers from his southern oil fields.

Novorussia east of the Dneiper gives him the space he wants.

I'm not saying Russia is right, but you have to at least understand their reasoning. Since NATO refused to demilitarize Ukraine, he will do it his own way.

[Overanalytical]

(Completely looking at this as dollars and cents)

I'm very seriously looking into one of these Russia ETFs. There has to be short term pressure and bias factoring in to these price movements. The war will end, and things will return to normal. Afterwards, will Russian companies be worth more or less than exactly right now? I have to think that they will be worth more than the 87% price cut these ETFs have experienced.

[ElPablo224]

@Overanalytical The Russian etfs are dissolving…They are finished…I looked as well but Schwab said they are closing all the funds…Going to 0

[Jason Alberty]

I'm from the US and I am telling anybody with an open mind that you REALLY need to start reading more sources of news from around the world. Outside of the US, EU, Canada, Japan, and Australia, people are not supporting NATO in the way our Fox News/CNN/MSM would like you to believe. Look at who joined the sanctions and who did not. I very much fear we are walking into a major trap being set for us in regard to dollar as reserve currency. People need to wake up, and for fucks sake, stop underestimating Russia and China immediately.

[Honus]

@Jason Alberty This is a great point, but one that many investors are likely not considering.

Last night I read through multiple articles, with points of view from American, French and Swiss policy makers and bankers and they're all warning the same thing - we can only play the "dollar as a weapon" card one time, but once you've played it you will have woken up the world to what can happen if they denominate their reserves in dollars or any other Western currencies and have them frozen if they don't toe the party line. Every non-NATO country that's watching what's happening to Russia from the bleachers just learned what happens if they're dollar-heavy and they find themselves on the wrong side of a disagreement.

This is what Jamie Dimon warned about earlier this week, without stepping too far out of line himself.

[det.sci]

@Honus As long as the Middle East continues to value the US security guarantees implicit in the petrodollar system, it's not going anywhere. Unfortunately for the US I might add, since the petrodollar system has hollowed out our manufacturing (see Dutch Disease).

[Honus]

@det.sci Excellent point. I wonder if the counter-argument might be that the petrodollar arrangement holds only until somebody makes Saudi Arabia a better deal. Whether China (or Russia) could find itself in such position to be that replacement is another good discussion.

Additionally, this may not even be the crux of the issue. It's possible that the point isn't whether the petrodollar system is replaced, but whether even incremental de-dollarization creates additional domestic inflationary pressure.

[farwest]

Somebody needs to find some working A22 Warhogs and destroy those Russian columns, a la the highway of death.

[taxman100]

@farwest Two things -

1. Apparently Russia is not worried about Ukrainian Air Force, regardless of what the western media reports about air superiority being contested.

2. Any third party who gets involved would most likely be on the receiving end of some sort of hypersonic missile landing on their airfields, Just pray it is not nuclear.

All for an area of the world (Eastern Ukraine) where at least half of the citizens actually prefer the Russians to whom are currently in charge. Ukraine will stil exist when this is over - how much is controlled by whom will be the question.

[MisterPeter]

Next, every country needs to find and confiscate (or at least freeze) ALL the ill-gotten gains of Russia's oligarch's that they've stashed outside Russia (about $250 billion by one estimate)! Their money is never safe in Russia (always a risk of seizure if they fall out of Putin's graces) and, once they see their money is not safe outside Russia either, there will be only one man to blame.

[P M D]

@MisterPeter It can be used to rebuild Ukraine and pay reparations after the war.

[vooch]

@P M D

Or perhaps reparations paid to

Afghanistan
Iraq
Yemen
Libya
Serbia
Vietnam
Korea
Somalia
Panama
Peru
Lebanon
Etc etc etc

[Bepe13]

@vooch Careful there! That could lead to a similar demand for the US! Somehow, we forget that we have been doing the same things for decades!

[P M D]

Tech workers have been packing up their belongings and fleeing Russia this past week — mainly to Georgia and Armenia. Rumors abound that Putin will impose "export visas" tomorrow and erect a new iron curtain to prevent further emigration.

[only-temporary]

Good! Supporting or tolerating dictators has consequences.

[not_sure_68]

@only-temporary So presumably Canadian equities are next...right? I mean Trudeau is a dictator right?

...and Biden pushed mandates through executive action that were shut down by the US supreme court. Perhaps US equities should get the boot too.

[Yggsdraggl]

@not_sure_68 What moron would liken Biden and Trudeau to Putin? [A: someone who's rubles just dropped a third in value.]

[GHFISHER]

@Yggsdraggl Suggest that it is not 'A:' but people who continue to believe that Mr Putin is a genius.

[appledoc]

Russia will be fine. They have Bitcoin!

Tell that to all of the Russian citizens who are having their worth completely wiped out and access to the world cut off because of one psychopath. Putin’s days are numbered.

[Entreri]

Excellent. Russian Ruble also has no bottom. Hyper inflation coming rapidly to Russia.

Putin and oligarchs are continuing to murder children in Ukraine, like this 6 year old girl:

www.cnn.com/...

1 million refugees have fled so far. 141-5 UN calls for Russian withdrawal, only hellish states like NK disagrees.

[not_sure_68]

@Entreri You do realize the Russian central bank has raised rates to 20% right? They can do what Paul Volcker did in the US in 1980 to stop inflation, because unlike the most indebted nation in world history...Amerika, Russia's debt to GDP is only 17.8%.

Official fairy tale statistics peg US inflation at only 1% lower than Russia's just now. Except the federal reserve cannot fight inflation due to the 30.2 trillion in debt the US treasury must service.

People not moving their assets from dollars to hard assets are doing it wrong.

[okeeffej]

@Entreri I'm not sure you really understand why Russia invaded Ukraine. How many civilians have we killed in Iraq, Egypt, Afghanistan, Syria, etc? I'm not at all a Putin supporter, but Zelenskyy is no saint in this. For 1 Ukraine damned the only fresh water river flowing into Crimea prior to the invasion.

[PC49]

@okeeffej Russia invaded because they saw an impotent, dementia patient as US "President." Just a coincidence two invasions by Putin both under Obuzzard/Bidet, and now Bidet?

[Alexander Schiller]

Good.

[AgainstTheDollar]

I don't know about uninvestable, all I know is investing in times like this, in markets like this, is how Russian oligarchs became Russian oligarchs. It's a risk, that's for sure, but the upside is beyond reason.

[Yggsdraggl]

@AgainstTheDollar
Oligarchs didn’t become oligarchs through transparent open market purchases. The fact that some of these companies own decent assets doesn’t mean that shareholders…especially foreign shareholders….will profit from realizing the value of those assets.

[AgainstTheDollar]

@Yggsdraggl The profited by scooping up massive wildly profitable industries and businesses when Russia's currency and economy was flailing and people thought it was 'uninvestable soviet garbage.'

I'll keep buying it, paying $1 for $50 worth of value, as in the end no matter if Russia collapsed and a western puppet is installed or if Russia takes all of Europe, the markets will continue and the shareholders will see the other side. Nationalization isn't on the table, as this is where oligarchs keep there wealth and how they diversify out of Russia.

[User 2825711]

@AgainstTheDollar Todays oligarch yesterdays managers of state owned enterprises who took over what was seen at the time as worthless industries when Soviet system collapsed. Rest is history. Basically the former comrades robbed the entire country