Russia Bans Foreigners From Selling Securities as Rout Deepens

(Bloomberg) — The Bank of Russia has banned brokers from selling securities by non-residents starting today in a bid to shield the nation’s assets from sweeping Western sanctions that include penalties on the central bank.

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In addition to the temporary sales freeze on the Moscow Exchange, the central bank said the currency and repo markets would open three hours late at 10 a.m. local time, while it will assess whether to open other markets. If a decision to open is made, it will be at 3 p.m. Moscow, according to a website statement. The regulator didn’t specify which assets the ban applied to.

The limits represent the most forceful measure taken by Russia after the latest round of sanctions, with the U.S. and the European Union agreeing to potentially block access to much of the $640 billion the country’s central bank has built up to reduce the Kremlin’s reliance on international markets. Russia’s invasion of Ukraine has spurred a flight from the nation’s markets, and the ruble was indicated 26% weaker in offshore trading on Monday as market makers from Sydney to Hong Kong pulled back.

“Russian authorities have to prevent fire-sales of Russian securities to prevent panic,” said Commerzbank AG strategist Ulrich Leuchtmann. It’s “something which is certainly harmful in the long run, but which Russian authorities seem to prefer given the risk of an even more significant ruble collapse.”

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S&P Global Ratings lowered Russia’s credit score below investment grade on Friday, while Moody’s Investors Service — which rates Russia one notch above junk — put the nation on review for a downgrade. Additional measures to exclude some Russian banks from the SWIFT messaging system could further choke up the country’s banking system and the central bank announced new steps on Monday to support lenders.

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The restrictions will extend to transactions on the Moscow Exchange but won’t work elsewhere, including the American depositary receipt market, according to Norvik Bank PJSC’s Mikhail Kotlov. “That’s why there will be two markets,” he said on Twitter.