Foreign investors should be able to withdraw from Russian market, lobby says

May 19 (Reuters) - Russian stock market lobby NAUFOR believes non-residents should be able to gradually withdraw from Russian assets so the securities they own can return to the market, the head of the group said on Thursday.

Russia put restrictions on foreigners trading Russian assets in March, saying it wanted to ensure decisions to exit were considered and not driven by political pressure, after Moscow sent tens of thousands of troops into Ukraine on Feb. 24.

The restrictions banned foreigners from selling assets on the stock market, allowing them to receive proceeds from owing securities to special C-type accounts as part of capital controls aimed at shielding Russia from Western sanctions.

"I think it will be valid to lift restrictions for non-residents, both from friendly and unfriendly (countries)," NAUFOR head Alexei Timofeev told Reuters.

Creating two separate mechanisms for these two groups of investors was complicated, Timofeev said, adding that the withdrawal process should be gradual and should not lead to a market crash.

Lifting restrictions would allow frozen assets to return to the market, in the first place, Timofeev said.

"Secondly, this would allow local retail and institutional investors to buy securities from non-residents. Thirdly, this will keep investors who are willing to continue their operations on the market."

NAUFOR, the national association of securities market participants, is an influential lobby group that has more than 400 members, including companies and banks.

The head of the financial policy department at the finance ministry, Ivan Chebeskov, has said that Russia authorities should avoid a situation when foreign investors will be aiming to "sell assets at any cost".

The central bank has praised the recent ban on the sale of securities by non-residents, saying it helped to avoid extreme market volatility that could have caused mass defaults through a domino effect. (Reporting by Reuters; Editing by Alison Williams)