Foreigners banned from selling Russian stocks as market set for limited reopening

(Reuters) -Russia plans to resume some stock trading on Thursday after a near month-long hiatus, with 33 rouble securities to be traded on the Moscow Exchange. Non-residents will have to wait, though – they will be barred from selling stocks and OFZ rouble bonds until April 1.

Trading in blue chips, including state lenders Sberbank and VTB, energy majors Rosneft and Gazprom, will take place between 0650 and 1100 GMT, with short-selling banned, the central bank said on Wednesday.

Russian stocks last traded on the Moscow Exchange on Feb. 25. The central bank then curbed trading as Western sanctions over events in Ukraine threw markets into turmoil.

Until April 1, foreign investors are allowed to conduct operations to lower their obligations including repo deals and deals with derivative instruments, but not to sell shares or OFZ rouble treasury bonds, the Moscow Exchange said.

The central bank started to buy OFZ rouble treasury bonds to support the domestic debt market when it reopened on Monday, and the finance ministry said it plans to spend 1 trillion roubles to buy Russian companies’ shares.

The limited re-opening by MOEX comes after the SPB Exchange, Russia’s second-largest bourse, partially restarted trade in foreign shares on Monday, allowing trading of the 15 most liquid stocks including Apple, Amazon, Boeing and Alphabet.

From midday on Wednesday, SPB Exchange allowed securities of another 1,639 foreign companies to be bought and sold by domestic market players, most of whom are Russian residents who use the platform to trade foreign stocks.

Trading and settlement is conducted in U.S. dollars but the funds will remain on the brokerage accounts and cannot be cashed out amid Western sanctions on Russia and capital controls that Moscow has introduced in retaliation, the exchange said.

FALLING INTO A LOSS

Trading of OFZ government bonds restarted on Monday, with the central buying OFZ papers in an effort to limit volatility.

Yields on some OFZs, including benchmark 10-year treasury bonds, spiked to almost 20%, or the level of the central bank’s benchmark interest rate, on Monday, before settling between 14% and 17% in subsequent days.

Volatility has left some players exposed to losses, according to Univer Capital, a mid-sized Russian brokerage, and which on Monday faced a mandatory sale of OFZs it held on behalf of its clients by Russia’s National Clearing Center (NCC).

Artyom Tuzov, executive director in the capital markets department at Univer Capital, said falling OFZ prices, which move inversely to yields, triggered margin calls and a liquidity shortage at the brokerage as a result.

“NCC has blocked the company’s trading limit and… is selling (our OFZ) assets as a result. The trading limit will be unblocked after (mandatory) sale is over,” Tuzov told Reuters.

NCC was selling OFZs held by Univer Capital at yields of between 17% to 20% versus 15% on average on the market that day, according to an internal Univer Capital memo seen by Reuters and confirmed by Tuzov.

As a result, nearly a hundred of Univer’s clients faced combined losses of 174 million roubles ($1.7 million), the memo said.

“All operations by NCC are aimed at limiting systematic risks so issues of a single brokerage do not spill over on the overall market,” the Moscow Exchange, parent company for NCC, said in a statement.

Unlike banks which are supported by the central bank via repo auctions with trillions of roubles on offer, brokerages have no access to state funds to replenish liquidity, Alexei Timofeyev, head of Russian stock market lobby NAUFOR, said.

“Unfortunately, the repo mechanism for brokerages and which was developed (by the central bank) after 2008 did not come into force which puts brokerages who are not part of larger banking groups in a worse position compared with lenders,” he said.

Aton and Finam, two other large Russian brokerages, both said they had enough liquidity, yet Finam added that a small number of its clients also faced margin calls after the OFZ market re-opened.

“Margin calls are unavoidable tomorrow (when stock market reopens), the market has drastically changed,” Timofeyev from NAUFOR said, adding that brokerage firms have tried to prepare by closing down some of their positions.

Trading on the derivatives market with contracts on Moscow Exchange and individual shares, included on the Moscow Exchange index, will take place from 10 a.m. to 2 p.m. (0700 to 1100 GMT) in the usual format, the central bank said on Wednesday.

It said the trading regime for subsequent days would be announced at a later date.

($1 = 100.4345 roubles)

(Reporting by Reuters; Editing by Andrew Heavens, Alison Williams and Hugh Lawson)