Russian exchanges claw back trading after turbulent six months

Financial News

Jason Corcoran in Moscow

13 April 2009

Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange after scores of suspensions and closures since last September sparked an investor exodus.

Investors turned to trading Russian global depositary receipts in London after the Micex and RTS exchanges were both suspended more than 30 times since September last year. Erratic trading patterns triggered shutdowns brought on by Russia’s war with Georgia, a banking crisis and investor scandals at miners Mechel and Uralkali.

Prior to the financial meltdown, Russian exchanges had 70% of equity trading volumes against London’s 30%. Following the blowout, the ratio stood at about 50% to 50%. Overall daily volumes traded in Moscow also slumped to $2bn (€1.5bn) from $7bn reached early in 2008.

Roman Goryunov, chief executive of the dollar-denominated RTS exchange, said March trading volumes indicated Moscow had won back territory ceded to London.

Goryunov said neither of the local exchanges had been suspended since the regulator introduced new rules on March 1 formalising trading halts and widening the corridors for market suspensions. Along with higher oil prices and a stronger rouble, the new rules had helped trading volumes to bounce back to pre-crisis highs.

In an interview with Financial News, Goryunov said: “Last month we saw the tendency had changed in Moscow’s favour with 70% to 30%.

“All of the problems last year caused the international investors to cease trading in Moscow in favour of London. The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left.”

Previously, trading was suspended until the next day if a share price fell more than 10%. Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.

The increased participation in the market of state development bank Vneshekonombank and state-controlled investment bank VTB Capital is believed to have buoyed local trading.

VTB, which manages Russia’s sovereign wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2bn, up 41% from $6.5bn in February.

The top seller of the month was state lender Sberbank with a monthly turnover of $31.3m. Energy company Gazprom had a turnover of $17.2m, followed by miner Norilsk Nickel with $15.7m. These three blue-chips accounted for 43% of total turnover.

The broker-dealers that handled the greatest trading volume in March were Russia’s Troika Dialog followed by Germany’s Deutsche Bank and local bank Renaissance Capital.

The RTS index was one of the world’s best performers in March after falling by over 70% from September last year through to February. It went up by 26.6% to 690 points as of March 31, against 545 points at the end of the previous month.