Yesterday, we discussed the effect of the Russian invasion on Russian stocks listed in United States stock exchanges. However, that is nothing compared to stocks listed in the Moscow Stock Exchange, where the entire market has collapsed and been halted. This has had a profound effect on Russian citizens, but investment funds around the world have been concerned about the halting of the Russian stock market.
Funds are concerned about their exposure to the Russian market, and selling isn’t an option with halted trading. On Monday, Russia banned foreign investors from selling shares to help prevent further drops in the market. Funds are unhappy about this as they believe Russian exposure will decrease demand for investors and lead to decreased investment in the investment fund itself, in which they might be forced to perform a fire sale of assets. According to Morningstar, funds own more than 71 billion dollars of Russian equities, and they are consulting with the SEC to figure out what to do. The move of certain emerging-market ETFs such as MSCI removing Russian stocks from their group of tickers doesn’t help due to tracking errors, and it provides us with some terrible scenarios. A fire sale of assets could cause a rapid fall in the share price of some stocks due to the immense amount of selling volume. Moreover, it could lead to some regulatory changes regarding the SEC’s rules on portfolios, which could allow investment funds to have safe access to nations like Russia in future instances like this.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.