By Rhod Mackenzie
On 2nd November at 18:00 Moscow time, trading on the St. Petersburg Stock Exchange was suspended due to it falling under the sanctions imposed on Russia entities. Although trading of Russian shares continued on the next day from 2 p.m., foreign securities trading has not yet resumed. The European Union is formulating proposals for the 12th package of anti-Russian sanctions, which could potentially also impact the Moscow Exchange. However, according to Elvira Nabiullina's statement at the Finopolis forum in Moscow, the Russian Central Bank consistently evaluates the financial infrastructure's risks, devises probable scenarios, and comprehends necessary actions.
The measures taken against the St. Petersburg Stocke Exchange are deemed effective by analysts as most of the turnover on the exchange comprises foreign securities from unfriendly countries.
Sanction pressure will result in a significant decline in trading volumes and commissions. It is predicted that the exchange's president will be replaced, according to Andrey Stolyarov, associate professor of the Department of Financial Market Infrastructure at the Higher School of Economics. Furthermore, the specialist deemed this measure as a foreseen action.
It is probable that the St. Petersburg Stock Exchange will seek new and novel markets,the analysts suggests. These may embrace trading in non-national securities from cordial nations, Russian share dealings (especially in emerging mining companies), or venturing into the digital assets arena. Furthermore, the specialist deemed this measure as a foreseen action. evertheless, this will only come to fruition eventually.
Undoubtedly, hostile nations consider the Moscow Exchange a prospective target for sanctions. Nonetheless, Stolyarov argues that the likelihood of restricting its operations is minimal.
Trading in government, municipal, and corporate bonds, Russian shares, as well as dealing in the money markets, remain entirely insulated from the impact of foreign regulators, with no investors hailing from inimical nations.
"There could be limitations on the foreign exchange market (dollar and euro), however, the Central Bank has developed an over-the-counter market to provide alternatives," stated the specialist to the publication.
Andrei Stolyarov has expressed uncertainty regarding the fate of Moscow Exchange shareholders from unfriendly countries. "But this is an issue all Russian corporations face," he states.
Fedor Naumov, chief strategist at PFL Advisors, suggests that if sanctions are imposed on Moscow Exchange, there may be some exemptions.
For instance, the Moscow Exchange could take part in the payment process for Russian gas. European partners could purchase rubles on the Moscow Exchange and then transfer them to Gazprom. The analyst claims that this would serve their interests.
While strict Western sanctions imposed on the Moscow Exchange might not lead to a catastrophe, it would definitely pose a significant challenge for both businesses and the Russian financial market. .
But according to Igor Dodonov, an analyst at Finam Financial Group, the restrictions are unlikely to cause substantial damage: "The limitations will not have a significant impact on the trading of Russian shares, bonds, and other ruble-denominated assets."
Potential sanctions may render dollar exchange trading unfeasible, resulting in currency trading occurring predominantly in the over-the-counter market.
This, as suggested by Dodonov, may lead to heightened currency pair volatility and an increased spread between currency buy and sell rates.
Spartak Sobolev, the Head of the Investment Strategy Research Department at Alfa-Forex, discusses this alternative in the field of foreign currency transactions in dollars and euros in light of sanctions against the National Clearing Center. Despite this, the analyst is cautious about the trend as it is unclear how the over-the-counter market will function, or whether it can function at all.
No significant impacts are anticipated for Russian firms and investors, according to Artem Shakhurin, an analyst at IVA Partners. He stated, "No one will prevent Russian investors from trading their assets on their exchanges, but the funds will operate solely for the Russian economy." Shakhurin added that there will be digital financial assets and products based on traditional instruments.
For now, analysts believe that the United States and other Western countries are unlikely to impose sanctions against the Moscow Exchange. Such sanctions could seriously complicate trade payments for Russian goods, ultimately harming those countries responsible for the restrictions. It's worth noting that these restrictions may particularly impact raw materials, which are indispensable for the world economy, including Western countries.
Foreign investments in Russian securities will be subject to sanctions, according to Artem Shakhurin. He adds that "one cannot expect excessive rationalism from Western governments lately, so any destructive steps are possible."
Ekaterina Kosareva, managing partner of the analytical agency VMT Consult, states that the EU is carefully preparing for the 12th round of sanctions against Russia.
"Western nations have already depleted all real and genuine threats in the fifth or sixth sanction package," states the analyst. Sanctions are now being imposed more for show to appease the global market situation and create difficulties for Russia; nonetheless, these are manageable challenges." For the EU, this move could give a false sense of control and stability amidst the chaos in the Middle East. However, it does not address the real economic issues that are being further jeopardised by a worsening political crisis.
If this step had been taken 18 months ago, the consequences could have been critical.
However, the world has changed and blocking exchanges is now seen as a predictable step. The Central Bank already has tools to minimize risks, as head Elvira Nabiullina pointed out. In conclusion, Ekaterina Kosareva believes this risk is now manageable.