Investors sitting on unwanted Russian assets are finding the exits are rapidly closing as Western political leaders push for far-reaching penalties to punish President Vladimir Putin’s invasion of Ukraine.
Stocks and bonds from Russia descended into freefall and activity was all but frozen in some corners of the market, traders said. The MOEX stock index wiped out more a third of its value on Thursday and the cost of insuring Russian debt against default soared to the highest since 2009.
“We don’t know if we can be banned for owning Russian assets, no one knows,” said Charles-Henry Monchau, chief investment officer at Geneva-based Bank Syz, which oversees about $28 billion. “You don’t know what will be the extent of the sanctions. When you don’t know, you just dump.”
Monchau said he had been thinking about picking up Russian assets because they’re so cheap, but is holding off for now.
UBS Group AG has triggered margin calls on some wealth management clients that use Russian bonds as collateral for their portfolios after marking down the value of debt issued by the country and its corporations. Rival Swiss wealth manager Pictet is also cutting the values of Russian assets in investors portfolios, according to people familiar with the matter.
Even Russian oil was offered at a record discount. Litasco SA, a Geneva-based trader, offered to sell 100,000 tons of Urals crude at a discount of $11.20 a barrel to Dated Brent, a benchmark for physical oil transactions all over the world.
The losses were widespread in other markets. The ruble touched a record low. Russia’s sovereign bonds plummeted, taking some to distressed levels, and the nation’s credit-default swap premium soared to almost 1,000. Ukraine’s $2.6 billion March 2033 debt dived, with price falling to 37 cents on Thursday, while the local currency market was suspended and limits were imposed on daily cash withdrawals.
“OFZ bid-offer spreads are so wide and CDS have gone parabolic,” said Marc Ostwald, global strategist at ADM Investor Services. “There is in effect no market.”
The benchmark MOEX Russia Index closed 33% lower in Moscow, erasing $189 billion in shareholder wealth. That’s the fifth most brutal one-day selloff among 90 global equity indexes analyzed by Bloomberg.