London Stock Exchange suspends 27 companies with Russian ties

Western financial system further constrains flow of financing after Ukraine invasion

The London Stock Exchange has suspended trading in an extra 27 companies with strong ties to Russia, hours after MSCI yanked Russian stocks from its widely-followed indices, as the western financial system further constrains the flow of financing to the country after the invasion of Ukraine.

Before the market opened on Thursday, the LSE said it was suspending trading with immediate effect in more than two dozen companies, including En+, Sberbank, Gazprom, Lukoil and Polyus.

The exchange said it was due to “events in Ukraine, in light of market conditions, and in order to maintain orderly markets”.

The LSE’s index business, FTSE Russell, also said Russian stocks will be deleted from all of its equity indices from Friday evening.

Overnight, index provider MSCI said it would drop Russian stocks from its widely tracked emerging markets indices, warning that the country’s equity market had become “uninvestable”.

The move marks a stark split from the past two decades when London become the primary offshore hub for Russian companies and oligarchs to do business. Thirty-nine Russian companies have listed on the LSE and raised $44 billion (€39.7 billion) since 2005, according to data from FactSet. But the flood of listings dried up after 2014 when sanctions related to Russia’s annexation of Crimea from Ukraine began to affect Russian companies looking for funding.

Standstill

Trading in Russian stocks and bonds on global markets has ground to a near-standstill over the past week as traders grapple with the impact of a barrage of financial sanctions on Russian companies and individuals, and countermeasures from Moscow.

The Russian central bank has suspended stock and derivatives trading in Moscow this week while authorities have also temporarily barred foreign investors from selling their Russian assets.

Even so, London had continued to trade Russian names and the value of many stocks such as Sberbank and Gazprom have plummeted. Traders said attempts to unwind clients’ positions in Russian stocks - as demanded in some sanctions - were hobbled by brokers not wanting to trade Russian names.

Sanctions

"The level of sanctions here are unprecedented and very dynamic," said David Schwimmer, chief executive of the LSE Group. "We are highly engaged with the regulators and other authorities in terms of making sure that we are complying with the sanctions and doing everything we can to be helpful."

He also defended the decision to keep the trading of Russian stocks on the LSE open up to now, pointing to US sanction demands that allow international investors three months to exit their Russia positions. A handful of Russian stocks are still active on the London market through depository receipts, including food retailer Magnit and steelmaker Evraz, part-owned by Roman Abramovich.

“When you think about the secondary trading of equities, that is not providing any support to those companies or to the Russian government. It is not allowing them to raise any capital. If anything, it is allowing international investors to get out of those positions,” Schwimmer said.

The LSE’s operations in Russia and Ukraine account for less than 1 per cent of total income, which hit £6.8 billion (€8.1 billion) in 2021.

FTSE Russell said Russia index constituents that are listed on the Moscow Exchange will be deleted at a zero value. Any Russia global depositary receipts - certificates that allow investors to bet on Russian stocks on global markets - that are suspended as of this Friday will also be deleted at a zero value.

Earlier this week the Financial Conduct Authority, the UK markets regulator, suspended the London quote for VTB, the Russian bank. Also included on Thursday's list was Phosagro, the fertiliser group chaired by Xavier Rolet, the former chief of the LSE Group. - Copyright The Financial Times Limited 2022