US sanctions prompt massive sell-off of Moscow Exchange stocks by foreign investors

Investors from countries friendly to Russia have started actively selling Russian stocks after the United States imposed sanctions on the Moscow Exchange, according to data from the Russian Central Bank.

At the end of the second quarter of 2024, assets held by non-residents in Russian brokerage accounts decreased by 9.6%, or nearly $1.96 billion (189 billion rubles), to $18.4 billion (1.77 trillion rubles).

The sharp decline in assets is occurring in accounts held by clients from international offshore zones (Virgin Islands, Panama, and Belize), as well as from countries bordering Russia.

Assets held by clients from Azerbaijan fell by 65%, from Uzbekistan by 30%, and from Kazakhstan by 20%.

The last time foreign investors reduced their investments in Russian assets was in the third quarter of 2022. However, over time, investments began to rise again.

The situation worsened due to U.S. sanctions against the Moscow Exchange, the National Clearing Center (NCC), and the National Settlement Depository (NSD). Investors started leaving the Russian market due to the risk of secondary sanctions and the inaccessibility of foreign currency trading.

"The sanctioning of the exchange and the NCC affected the desire of global offshores to do anything within the Russian perimeter. At the same time, it should be understood that a large part of such accounts is controlled either by friendly non-residents or by Russian citizens," explained a source to the Russian newspaper Kommersant.

In August 2024, the Moscow Exchange stopped publishing data on foreign currency trading volumes. 

On October 11, media reported that the Kazakhstan Stock Exchange (KASE) had severed ties with the Moscow Exchange.