The Moscow Exchange will open currency and derivatives trading three hours earlier from March, in the latest effort to attract more investor demand in China.
Trading takes place from 7am to midnight in Moscow as the exchange seeks to capture more of the waking hours of countries east of Russia.
The stock market’s decision marks the latest in a series of efforts by Moscow and Beijing to promote trade between the two countries, which have historically promised much but yielded little.
Plans for large-scale lending by Russian companies using “panda bonds” in Chinese renminbi have failed, with only one major issue so far.
“Increasing renminbi volumes traded against the ruble is a long-term goal of both Russia and China,” said Igor Marich, director of development at the Moscow Exchange.
About $ 30 billion in transactions are executed daily in rubles in global currency markets, predominantly against the dollar. About 25 percent of the daily ruble market takes place on the Moscow Exchange.
In the past five years, ruble and renminbi transactions on the Moscow Exchange have risen by 27 percent, but are still overshadowed by dollar transactions. Last year, the exchange handled Rbs986 billion ($ 13.4 billion) in ruble-renminbi transactions, and Rbs266.6tn in ruble-dollar transactions.
“We hope the extension of trading hours will be beneficial to these flows and we hope that more Chinese investors will trade FX and other asset classes on the exchange,” said Marich.
Efforts to develop a market for converting the renminbi directly into the ruble began over a decade ago when the Russian central bank and the People’s Bank of China agreed to work together to create a market for the direct trading their domestic currencies against each other, hoping that will replace the current process of trading against the dollar.
The mounting tensions between Russia and major economies in the west have made it difficult for many investors to invest in the country’s economy. At the same time, Russia has moved politically closer to China, which was keen to increase the use of the renminbi on the international stage.
“We are very keen to diversify our products and we pay a lot of attention to the development of renminbi and trading in euro against the ruble,” said Marich.
According to the latest data from the Bank for International Settlements, 88 percent of the $ 6.6 trillion daily currency transactions have the dollar on one side of the transaction. Currency trading volumes on the Moscow Exchange averaged Rbs1.2tn in January, with cash transactions growing 44 percent compared to last year.
An emerging market currency specialist said the move from Moscow suggests Russia is being forced to attract more trading activity, rather than having wealthy investors from the east banging on the door of the stock exchange.
“This seems like China is going home early and [they] expect Moscow to sing their tune. Not the other way around, ”this person said. “There has to be a market there, otherwise Moscow Exchange wouldn’t bother.”