Russian stock markets jump as foreign investors return

Russian stock markets jumped and the rouble strengthened on Monday after the bourse decided not to allow foreign investors to return to the market for the first time since February.

With the uncharted waters of the equity market, traders expect that foreign investors will immediately sell shares if they return some shares.

Russia's stock market fell 3% on Friday after the exchange said it would let clients from friendly countries start trading after an almost six month hiatus.

After Friday's market close, the Moscow Exchange said the ruling on the return of foreign investors would only apply to the main stock market, not the derivatives market.

The dollar-denominated RTS index was up 2.5% to 1,099 points at 0940 GMT, while the Russian MOEX index was 2.2% higher at 2,098 points.

Analysts said that the return of foreign investors could catch short sellers that had bets on the market sliding once some foreigners were able to offload their holdings.

The Moscow-based BCS Global Markets brokerage said that those who were waiting for excess supply of shares and opened shorts will close their positions today, which may result in a short-term rebound.

No date has been set for when foreigners from friendly countries - which account for 1% of Russian holdings - will be allowed to trade Russian shares. There is no chance that non-residents from unfriendly countries, including the European Union members, the United States, and Britain, will be able to trade on Russian markets in the near future.

Since February 25th, foreigners have been locked out of the market after President Vladimir Putin ordered tens of thousands of troops into Ukraine.

The Russian rouble was 0.9% higher against the dollar at 60.04 at the time of 0940 GMT, having briefly dipped below the 60 mark. It gained 1.1% to trade at 60.83 against the euro.

Since the beginning of August, the currency has fallen back from multi-year highs reached earlier this year under strict capital controls.

Maxim Biryukov, senior analyst at Alfa Capital, said the rouble was likely to continue to weaken from this point.

He said that the fall in exports to 'unfriendly countries is the main factor in the weakening of the rouble due to the initiative of both Russian and importers.

In the event of a slowdown in the global economy, a decline in volumes and prices may have a weaker impact on the trade balance and the rouble, though this effect is partially offset by export prices.