News Column

Russian banks not yet pariahs

August 12, 2014

MOSCOW: The shares of Russia's two biggest banks soared yesterday after avoiding being delisted from a top emerging markets index as part of the West's response to the Kremlin's stance in Ukraine.

The New York-based MSCI index provider decided on Friday to keep offering the shares of Sberbank and VTB to clients as long as the two state-held giants did not issue any more stock.

Traders said that a delisting would have threatened to accelerate the pace of investors' capital outflows from Russia.

VTB's shares gained 4 percent and those of Sberbank rose more than 3 percent in the opening minutes of trade on Moscow's main exchange.

The Moscow stock market followed the banks' lead higher and was up more than 1 percent.

Russian investors said they now expected the other main exchanges in Europe to follow New York's lead and keep the two stocks.

"We believe that the risk of two of the heavyweight members of the MSCI Russia being excluded from the index was weighing on the broader Russian market last week, and that the news will therefore provide some relief to the market," VTB Group's investment house said in a research note that stressed it might have a conflict of interest in the matter.

The MSCI Russia index is global traders' preferred way to access a balanced package of paper that reflects the price of the main Moscow-issued stocks. MSCI was under pressure to drop the two finance houses as part of a sanctions package unleashed against Russia's financial, defence and technology sectors over the Kremlin's perceived backing of insurgents in eastern Ukraine.

The index provider said it reached its decision after a series of "consultation with the investment community" over concerns that the two banks were now prohibited from issuing new shares on the US and European markets. MSCI said in had decided not to raise the weight of the two stocks in its Russia index should the banks ignore the restrictions and proceed with a share issue in order to raise more capital.

It would weigh its decision again if VTB and Sberbank announced plans to issue new stock. - Sapa-AFP

Cape Argus

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Source: Cape Argus (South Africa)

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