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."