Russian stocks drop 4% on 2nd day of reopened trading in Moscow, as restrictions fail to hold back selling

• Russia's main stock index fell 3.66% Friday as the Moscow stock exchange opened for the second day after a monthlong pause.
• Strict rules, including that foreigners are not allowed to sell shares, couldn't prevent big drops in the likes of Gazprom and Lukoil.

Russian stocks fell just under 4% Friday on the second day of trading on the Moscow Exchange after a monthlong pause, as stringent restrictions on activity failed to stem selling.

Moscow's Moex stock index finished 3.66% lower, putting the index down around 38% for the year.

Many of Russia's biggest companies ended deep in the red. Energy giant Gazprom fell 12%, oil company Lukoil slipped 6%, and airline Aeroflot tumbled 18%.

Lenders Sberbank and VTB, which have been hit by Western sanctions, fell 3% and 8%, respectively.

The falls came after the Moex climbed 4.4% on Thursday, having risen as much as 12% in early trading, as Russia reopened its main stock market after a month. Trading last took place on February 25, the day after Vladimir Putin ordered the invasion of Ukraine.

The government and central bank suspended trading as they tried to limit the huge selling pressure on Russian assets and to prevent foreign investors from withdrawing their cash. The Moex tumbled as much as 50% on the day Russia invaded Ukraine.

However, although trading in Moscow has reopened, the exchange has imposed strict limits on activities.

Trading has only commenced in 33 of the biggest companies; the trading day has been shortened to just over four hours; foreigners are not allowed to sell Russian assets; and short-selling is banned.

The Russian government has prepared to deploy $10 billion from the country's sovereign wealth fund to prop up its financial markets. However, it has not been clear whether the money has made its way into the market.

The rules have made it very difficult for major US and global institutional investors to cut their exposure to Russia, as many have pledged to do. Foreigners own about half of the market's shares.

On Thursday White House economic advisor Daleep Singh labeled the reopening of the Moscow Stock Exchange a "charade."

"This is not a real market and not a sustainable model — which only underscores Russia's isolation from the global financial system," he said in a statement.

Ben Laidler, global market strategist at trading platform eToro, told Insider Thursday: "I think this is going to be a long journey back to a fully functioning market."

He said the outlook for Russian stocks, which are the world's worst performers this year, is not good. "Russia's going to have a huge recession," he said. "Then on top of that you've got sanctions and everything else."

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