Russian assets are removed from indices as they become untradable. MSCI, one of the world’s leading index providers, removed MSCI Russia Indices from Emerging Markets status and reclassified them as Independent Markets. MSCI will implement this decision after the market closes on March 9. MSCI will exclude Russia from more than 100 global and regional indices under this reclassification. The FTSE Russell also removes Russian stocks from its indexes.
It should also be noted that the assets of the Bank of Russia overseas are frozen and it is not possible to trade with these assets. By separating the Russian economy from the global economy, it is isolated and isolated from the global financial system and markets. It is essentially impossible to parse the exact economic consequences of the war, but so much can be said; Specifically, higher oil prices will have the effect of lowering real GDP and increasing inflation in Europe. For the US, it is unlikely that their prices will increase as much as in Europe, due to the shale gas and oil resources.
A sharp ruble depreciation prompted the Bank of Russia to raise interest rates urgently and raise the policy rate to 20%. In addition, capital controls were implemented by the central bank to ease selling pressure on the Russian currency. While capital controls are not as stringent as Argentina or even China, Russia’s capital control measures will temporarily restrict local brokerages from selling securities held by foreign investors. Given that a large part of the central bank’s foreign exchange reserves are currently frozen, the ruble is more vulnerable than it ever could be. The economic repercussions from the invasion of Russia remain rather unclear. If the situation in Ukraine deteriorates significantly or spreads to other countries, this could significantly change the economic outlook and thus the monetary policy outlook. Sharp ruble depreciation and aggressive monetary tightening will push the economy into recession by the second quarter of the year. If the sanctions are included in the scope that will directly affect the country’s oil and natural gas revenues, Russia’s current account and budget balance will be significantly affected.
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