Russia Dusts Off 2008 Playbook With $10 Billion Ready to Buy Local Stocks
(Bloomberg) -- Russia will deploy up to $10 billion from its sovereign wealth fund to buy up battered local stocks after sweeping international sanctions shuttered the nation's markets.
Under the plan, the Finance Ministry may hire VEB.RF and other financial organizations to carry out the purchases on behalf of the $174.9 billion National Wellbeing Fund.
The announcement at a Tuesday government meeting by Prime Minister Mikhail Mishustin harks back to the tactics devised during the 2008 global financial crisis, when Vladimir Putin held the post of premier between presidential stints. Back then, Finance Minister Alexei Kudrin allocated around $7 billion to invest in high-rated Russian stocks.Â
Local equity trading hasn't restarted since the weekend and shares will likely plummet when the Bank of Russia deems trading can resume. Foreign-listed shares in Russian companies extended their rout on Tuesday as investors sought to unwind billions of dollars of holdings.Â
As much as half of Russia's international reserves have been frozen abroad as punishment for Putin's invasion of Ukraine. In response, the central bank has introduced capital controls and banned foreigners from selling securities locally, effectively shutting the exits for investors. Â Â
State-run development bank VEB.RF is among Russian financial institutions targeted by sanctions in recent days.
Foreign holdings of Russian stocks stood at $86 billion at the end of last year according to data from the Moscow Exchange. The bourse's two-day equity-trading closure is so far the longest pause since 1998, the year Russia defaulted on around $40 billion of local debt.
A decision on whether to open on Wednesday will be announced at 9 a.m. local time Wednesday, according to the Bank of Russia.
©2022 Bloomberg L.P.
With assistance from Bloomberg
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