Russia will open the stock market this week: the impact will be ‘internal’ and not global
The reopening of the Russian stock market this week is unlikely to trigger widespread unrest, according to an economic expert.
“In my view, many market participants have already taken these parameters into account over the past week to manage their exposure to the Russian market, but markets around the world, especially Europe, Asia and the United States States, will undergo a period of adjustment,” Anthony Kim, economic freedom researcher at the Heritage Foundation, told FOX Business.
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Russia kept its stock market closed for three weeks as crippling financial sanctions and a significantly weaker ruble (RUB) raised fears of a sell-off and a possible economic death spiral.
Russia also faced the danger of a sovereign default, but avoided that particular hurdle with a debt payment of around $117 million. Earlier this month, ratings agency Moody’s placed Russia at the second-lowest rung of the credit ladder, just above default.
Kim said the payment created space for a “soft landing”, which helped ease “some fears”, but that the Russian economy will feel the impact far more than the rest of the world.
“There will be immediate negative ripple effects, but markets like ours and large others in Europe and Asia will make relatively smooth transitions,” Kim said.
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“The Russian economy will have more of the expected impact of all the sanctions we have put in place,” he added. “The ability of the Russian government to pay its next rounds of debt payments will be reduced…there is of course this risk of sovereign debt default, but given the degree of global linkage of the Russian financial sector/system n It’s not as deep, broad and direct as sectors in other countries, the pain will be more internal over time.”
The market opening will certainly create some level of selling over the next week, and Russia will continue to seek interventions as it remains cut off from the West after the US, Europe and Japan suppressed Russia’s access to the SWIFT global economic network. system.
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The Moscow Times reported on Friday that Russia’s Central Bank will buy government bonds when trading resumes, but it did not reveal how much it will spend to “limit risks to financial stability.”
“We are now ready to gradually resume trading on the Moscow Stock Exchange. On Monday, trading will open for government bonds,” Governor Elvira Nabiullina announced. “In order to neutralize excessive volatility and provide balanced liquidity, the Central Bank will buy government bonds.”
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Economic experts have pointed to the significant impact of the central bank asset freeze on Russia’s ability to fight sanctions.
Earlier this month, economics professor Brian Brenberg told ‘Fox & Friends First’ that the asset freeze would be the ‘biggest shock’ to the Russian economy since ‘Putin is counting on those reserves’.
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“When the world turned against him, that’s how he was going to keep funding things,” Brenberg said. “The world said you wouldn’t get that money, so Putin is struggling on that front.”
“You can’t fund things, you can’t get money,” he said. “It’s hard to fight a war when you can’t have money.”