By Carolyn Cohn and Lawrence White

LONDON: Russia said on Tuesday it was placing temporary curbs on foreigners seeking to exit Russian assets, putting the brakes on an accelerating investor exodus driven by crippling Western sanctions imposed over the invasion of Ukraine.

Russian assets went into freefall on Tuesday with London-listed ishares MSCI Russia ETF CSRU.L plunging 50% to hit a fresh record low and Russia's biggest lender, Sberbank SBNCyq.L slumping 21% as investors raced for the exit.

Major money managers, including hedge fund Man Group EMG.L and British asset manager abrdn ABDN.L, have been cutting their positions in Russia even as the rouble slumped to a record low and trading froze on its bonds.

Top asset manager BlackRock Inc BLK.N said on Tuesday it was consulting with regulators, index providers and other market participants "to help ensure our clients can exit their positions in Russian securities" where allowed.

"There is certainly a willingness from asset managers and benchmark providers to get rid of Russia exposure in their portfolios and indexes," said Kaspar Hense, a senior portfolio manager at Bluebay Asset Management in London.

"The big question is where do buyers turn up?"

Austria's Raiffeisen Bank International (RBI) RBIV.VI is also looking into leaving Russia, two people with knowledge of the matter told Reuters, a move that would make it the first European bank to do so since the invasion of Ukraine - which Moscow calls a "special operation." RBI said it had no plans to leave Russia.

Russian Prime Minister Mikhail Mishustin announced the country will temporarily stop foreign investors from selling Russian assets to ensure they take a considered decision, but did not give details.

Moscow's move to impose capital controls mean that billions of dollars worth of securities held by foreigners in Russia are at risk of being trapped.

“It has been a hell of a rollercoaster,” said a London-based hedge fund manager invested in European financial firms who declined to be named, adding the fund had cut some indirect exposure to Russia.

British asset manager Liontrust LIO.L has suspended dealing in its Russia fund, while the prices of some of the most popular Russia-focused exchange traded funds were trading at a discount to their net asset values.

Ratings agency Fitch has identified 11 Russia-focused funds which have been suspended, with total assets under management of 4.4 billion euros ($4.9 billion) at end-January, a spokesperson said by email.

Will not invest

In a matter of weeks, Russia has turned from a lucrative bet on surging oil prices to an uninvestable market with a central bank hamstrung by sanctions, major banks shut out of global payments system SWIFT and capital controls choking off money flows.

SWIFT said on Tuesday it was waiting to see which banks authorities want disconnected from its financial messaging system as sanctions are rolled out.

Visa Inc V.N and Mastercard Inc MA.N have blocked multiple Russian financial institutions from their networks and Germany's market regulator BaFin said it was closely monitoring the European arm of Russia's VTB Bank VTBR.MM, which was no longer accepting new clients.

Shares in some European banks remained under pressure after heavy declines on Monday because of lenders' exposure to Russia and the European banking sector .SX7P was down 3% on Tuesday.

Asset manager abrdn has around two billion pounds of client money invested in Russia and Belarus and has been cutting its positions, Chief Executive Stephen Bird said.

"We will not invest in Russia and Belarus for the foreseeable future," Bird said.

Man Group cut its investments in Russia in recent weeks and now has negligible exposure to Russia and Ukraine across its portfolio, its Chief Financial Officer Antoine Forterre told Reuters on Tuesday. Read full story

Shares of Raiffeisen RBIV.VI were down 11.3% in early afternoon, after sliding 14% on Monday. Shares of Italy's UniCredit CRDI.MI fell 2.5%, after Monday's 9.5% fall.

The European Central Bank has put banks with close ties to Russia, such as Raiffeisen and the European arm of VTB, under close observation, two sources told Reuters.

No quick resolution

Tuesday's share price swings and investor comments came as Russia faced increasing isolation over its actions in Ukraine, with resistance on the ground denying President Vladimir Putin decisive early gains despite heavy shelling and a huge military convoy outside Kyiv.

In recent days, the United States, Britain, Europe and Canada have announced a raft of new sanctions.

The London Stock Exchange said on Tuesday it would stop trading in two global depository receipts (GDRs) for VTB Bank after Britain's financial regulator suspended them in response to sanctions.

The German stock exchange operator widened the securities it would no longer trade to bonds issued by Russia.

India's top lender will not process any transactions involving Russian entities subject to international sanctions imposed on Russia, according to a letter seen by Reuters and people familiar with the matter.

Amid wild swings in bank shares, bankers have sought to reassure investors and the public, saying they are well capitalised and their footprints in Russia are relatively small.

Deutsche Bank DBKGn.DE Chief Executive Christian Sewing told the Bild newspaper it would be wrong to assume a quick resolution to the crisis in Ukraine following the exclusion of Russian banks from the SWIFT payment system.

"That would be the wrong expectation," Sewing said.