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May 20, 2022
Russia Stock Market Crash Intensifies—BlackRock Warns Investors Of ‘Significant Declines’
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Russia Stock Market Crash Intensifies—BlackRock Warns Investors Of ‘Significant Declines’

Topline
Though the Moscow Stock Exchange was closed for a second straight day, the Russian stock market was battered by steep declines again on Tuesday as shares and funds trading internationally plummeted in value, prompting $10 trillion asset manager BlackRock to caution investors about buying into the funds while the volatility lingers.

Top Russia funds have erased roughly 60% of their value amid Putin’s invasion of Ukraine.

© 2018 Bloomberg Finance LP

Key Facts

After plunging roughly 30% apiece on Monday, the VanEck Russia ETF and iShares MSCI Russia ETF—the two largest U.S. exchange-traded funds exclusively holding Russia-based stocks—fell another 10% each once the market opened Tuesday.  

The funds, representing nearly $2 billion in combined asset value, have fallen about 62% in the past two weeks as governments slapped sanctions on top holdings like financial institution Sberbank, while businesses dropped billion-dollar investments in other firms like gas giant Gazprom.

In light of the volatility, BlackRock said Tuesday it would stop issuing new shares of its iShares MSCI Russia ETF “until further notice,” citing the “significant declines” to the Russian ruble and diminished liquidity of the nation’s stocks after U.S. sanctions on Russian companies and the nation’s stock exchange closure.

The asset manager also cautioned investors the fund may not meet its investment objective until the geopolitical turmoil has subsided or Russia’s central bank reopens the Moscow Stock Exchange. 

Meanwhile, the Moscow Stock Exchange, Russia’s largest exchange group with some 200 stock listings, remained closed Tuesday, after the nation’s central bank announced it would halt stock trading through Saturday as it “assesses the feasibility” of reopening, “depending on the development of the situation.”

Key Background
The economic fallout since Russian President Vladimir Putin ordered an invasion of Ukraine early Thursday has piled on this week amid a growing list of sanctions targeting the Russian government, businesses and oligarchs. The nation’s ruble sank to an all-time low of nearly 118 against the U.S. dollar in offshore trading on Monday but has since pared back losses to about 104 rubles per dollar. Additionally, oil giants British Petroleum and Shell, as well as the world’s largest sovereign wealth fund, have all announced they will abandon Russian investments after the country’s unprovoked attack on Ukraine. Meanwhile, experts have warned the crisis has made the nation “increasingly uninvestable for global investors.”

Surprising Fact
On Monday, Harry Whitton, head of ETF sales trading at Old Mission Capital, told CNBC that when Greece closed its markets during six weeks of economic turmoil in 2015, stocks reopened at nearly the same value as the ETFs in the U.S.

Further Reading
Russia Stocks Crash Even With Moscow Exchange Closed—Experts Call Market ‘Uninvestable’ (Forbes)

Live: Russian Military Convoy Nears Kyiv As Ukraine Condemns ‘Barbaric Missile Strikes’ In Kharkiv (Forbes)

U.S. And Allies To Remove Some Russian Banks From SWIFT, Sanction Central Bank (Forbes)

Shell Joins BP—Abandons $3 Billion Russia Investments After ‘Senseless’ Ukraine Invasion (Forbes)

Read More

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