Russian companies listed on international stock exchanges are increasingly exposed to default risk

While the Moscow Stock Exchange is set to reopen on Thursday after a four-week shutdown, trading in Russian stocks listed on international exchanges remains on hiatus indefinitely – and the suspension significantly increases the risk of default for these companies.

Since stock exchanges around the world halted trading by Russia-linked companies following the country’s invasion of Ukraine, the median one-year market signal default probability for nearly two dozen companies companies listed abroad increased by more than 20% to 23.1% in March. 8 compared to just 2.5% on February 21, according to data from S&P Global Market Intelligence.

The analysis calculated the probability of default based on the stock price movements of 16 companies headquartered in Russia and listed on stock exchanges in the UK, US, Singapore and Australia, and six overseas-based Russia-linked companies that primarily trade on the London Stock Exchange.

The probability of default for these companies now ranges from 7.60% to 57.57%, compared to just a few weeks before the general rise in risk, when the probability of all but two companies was in the single digits.

The London Stock Exchange suspended trading in 28 companies with close ties to Russia effective March 3. In the United States, the Nasdaq and the New York Stock Exchange imposed trading halts on shares of Russian-based companies on February 28 with no plans to resume trading. .

Russia’s central bank said its stock market would partially reopen on Thursday after a nearly month-long hiatus since Feb. 25, with 33 stocks trading on the Moscow Stock Exchange.

For domestically traded Russian stocks, the median one-year default probability of companies listed on Moscow-based stock exchanges also jumped to 22.1% on March 8 from 2.1% on February 21, data shows. from S&P Global Market Intelligence.

The spike in default risk came as the price of Russian stocks listed on overseas markets crashed amid a sell-off by investors reducing their exposure to Russian assets as Western sanctions rolled out.

These companies include Singapore-listed agriculture giant Don Agro International, which also said in early March that any company facing sanctions or engaging in sanctioned business dealings with Russia should suspend trading in its listed securities until it has demonstrated that sanctions are no longer applying to their companies, and HeadHunter Group, a Nasdaq-listed online recruitment company. The Nasdaq halted trading in the company’s stock on Feb. 28.

A woman walks past a board showing the exchange rates of the euro and U.S. dollar against the Russian ruble in Moscow, Russia March 11, 2022. REUTERS/Maxim Shemetov

As the risk of default increased, the corresponding change in the implied credit ratings of these companies also changed dramatically. One of the assessed companies lost seven rating points and nine other companies lost five or six implied ratings.

The decline in the creditworthiness of Russian companies comes as a barrage of rating agencies has cut the country’s credit rating.

S&P Global Ratings, whose credit ratings are independent of implied credit ratings generated by S&P Global Market Intelligence, downgraded Russia’s foreign and local currency credit ratings to CC from CCC- on March 17, just two weeks after that the company has downgraded Russia to undesirable territory on heightened risk of conflict-related default.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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