‘This is not a real market.’ How Russian stocks surged in first trading after crippling economic sanctions

Russian stocks surged upon their reopening for the first time in a month, demonstrating the impact of new restrictions that effectively isolate international investors from participating in setting prices.

Trading reopened in 33 Russian stocks, and most surged in value. Natural gas giant Gazprom, oil companies Lukoil and Rosneft and aluminum producer Rusal International saw double-digit percentage gains.

Aeroflot was one of the few decliners, as the Russian airline which is banned from European Union airspace dropped 16%.

The ruble-denominated Moex index rose 4%.

The Russian RTS index
which is denominated in dollars, fell by 9%. The dollar
has surged 30% against the ruble this year.

The valuations are incredibly different than assigned in the West. Lukoil’s local shares were roughly 100 times the value of Lukoil’s London-listed shares, which last traded on March 4, and Gazprom’s were ten times as high.

Russian authorities have banned brokers from processing sell trades by foreign investors. Short-selling also is banned.

Daleep Singh, the deputy U.S. national security adviser, called it “a Potemkin market opening.”

“After keeping its markets closed for nearly a month, Russia announced it will only allow 15% of listed shares to trade, foreigners are prohibited from selling their shares, and short selling in general has been banned,” Singh said in a statement.

“Meanwhile, Russia has made clear they are going to pour government resources into artificially propping up the shares of companies that are trading. This is not a real market and not a sustainable model—which only underscores Russia’s isolation from the global financial system. “