‘Falling down a bottomless pit was among the possibilities’: Russia’s stock market prepares to finally reopen. Here’s how bad the sell-off was the last time traders faced such a historic shutdown

After being closed for five weeks, Greece’s main bourse was finally due to reopen on that steamy day in August, ending one of the longest shutdowns of equities trading in recent memory.

Some traders thought the Russians would claim the record this year after officials there shut down the Moscow Stock Exchange following a volatile day of trading on Feb. 25, day two of Vladimir Putin’s invasion of Ukraine.

The MOEX though is expected to go live again tomorrow with very limited trading, the Wall Street Journal reports.

If the Athens experience is any indicator, the Russians, faced with an even bigger stocks- and currency-meltdown, could be in for one rocky ride once things reopen.

Screens go red

Back in August, 2015, the Athens Stock Exchange boss, Lazaridis, got to work early, in part to keep order—a tall task.

By that point, Greece was more than five years into the country’s worst economic crisis since World War Two. There were real and constant fears that Greece would be dumped from the euro zone as anti-austerity protests turned the capital into the scene of fiery protests.

As is the case in Russia today, Greeks were hit then with crippling capital controls, which was supposed to keep a lid on big trading volumes and prevent a market meltdown—or so it was hoped.

At 10:30 a.m. that Monday morning, trade resumed on the ASE.

Phones sitting idly on brokers’ desks sprang back to life, and trading screens turned a deep shade of red.

At the start, the general index plummeted by nearly 23%. Bank stocks locked in at the the 30% down-limit as wave after wave of sell orders filled the system. There were no buyers in sight.

In Athens, Lazaridis said that a lot of planning went into the resumption of trading, with both Greek and EU officials working together to limit the fallout of a chaotic resumption of trade.

Still, uncertainty was high as the country teetered on the brink of bankruptcy, and capital controls had been put in place to prevent a collapse of the banking system.

“We did fear how the day would go,” Lazaridis tells Fortune. “Falling down a bottomless pit was among the possibilities. It wasn’t our baseline scenario but it was a scenario,” he said.

Investor confidence shattered

Investor confidence in Greece had been shattered by a leftist government that had entered a stand-off with international creditors over funding terms even though government coffers were running dry.

After a bank run that saw €50 billion worth of deposits flee the Greek financial system, the country’s loss-making banks were severely weakened and needed more capital as the economy dipped back into recession.

In order to prepare the trading system for an unpredictable volley of trading on that day, Athens bourse officials had introduced a series of rules-changes that acted as a kind of circuit-breaker, such as a reduction in thresholds that trigger a temporary trading suspension.

“The mood of the day was ‘Get the hell out’, especially in financials,” said a senior official from a large Athens brokerage.

Half way through the day, however, selling pressure somewhat eased.

The session ended with the general index down 16.2%—a bloody day, but not the Armageddon some had been expecting. Some buying had even materialized in non-bank shares.

In the days that followed, losses in banks shares remained steep. But the broader market steadied, with the general index sliding by about 2-3%.

“We had introduced two measures which made the difference,” said Lazaridis. 

“Firstly, when the bourse closed abruptly five weeks earlier, we managed to cooperate with our custodians and their international network, and ensured the timely settlement of all trades, meaning that all sellers received their money and all buyers received their shares, so there were no disgruntled investors,” he said.

And secondly, Lazaridis added, that it was crucial for the market’s reputation that the Bank of Greece and European Central Bank accept our proposal to exempt foreign investors from the imposition of capital controls, which they did.

Moscow 2022

The plunge in Athens that day looks like a walk in the park, when compared to what is likely to happen when trading resumes in Moscow.

With an economy about 13% the size of Russia’s, Greece did not experience a stampede of foreign companies leaving the country.

Another difference: The Greek crisis ran over a 10-year period, starting in 2009, which means that key foreign players, such as French lenders Credit Agricole and Societe Generale, had gradually pulled out of the country well before the summer of 2015.

Furthermore, a series of political changes helped cushion the drop in equities that August day.

During the shutdown period, Greece had reached an initial agreement with its troika of lenders (the European Union, European Central Bank, and the International Monetary Fund) on securing aid that ultimately prevented a sovereign collapse as Prime Minister Alexis Tsipras broke with his party’s leftist hardliners, indicating the adoption of a more pro-European stance.

History shows that ceasing equities trading for a lengthy period often proves to be a good tactic for countries in dire economic trouble, as was the case in Egypt in 2011, where the market was closed for two months.

“These bourse-closures allow for political change that markets view more positively,” political analyst David Lea tells Fortune. “It will take a very significant political shift for Russia to restore its place in global markets, or a climb down by Putin from his positions, neither of which look likely right now.”

As the war in Ukraine continues, sanctions, partial capital controls and the crumbling ruble have already taken an enormous toll on the Russian economy.

One casualty of all that: direct foreign investment in Russia is on life-support as sanctions put acute pressure on its financial system and asset prices.

“The mass exodus of multinationals is set to lead to structurally higher unemployment and lower output. Investment will suffer amid the uncertainty, whilst technology restrictions will force it to become more self-sufficient,” according to asset manager Schroders.

It’s not as if investors are going into the reopening of Russian trading flying completely blind.

London-listed Russian stocks have, as of Monday, had lost more than 90% of their value, and the ruble has collapsed some 25% since the Feb. 24 invasion.

Comparatively, though, the sheer size of the Russian companies could help them recover more quickly than what they did in Greece, some experts say.

It took some two years for the Athens bourse to regain trading levels seen prior to the bourse shutdown. And, by 2019, Greece’s main stock exchange rose more than 40% for the year, making it Europe’s top performing bourse.

And that was without the benefit of corporate giants like Gazprom. The Russian energy company is still, despite its troubles, a household name in Europe, points out Lea. 

“Russian companies also have access to capital from places like China, whereas the Greeks had no alternatives,” he adds.