Russian stocks are "essentially worthless" despite the value they hold on the Moscow stock exchange, MSCI said in a note on Thursday.

Since Russia’s war on Ukraine, the Moscow Exchange plunged by as much as 44% before slightly recovering. Economic sanctions and reduced trading have damaged the Russian economy.

Russian stocks are unlikely to be worth the perceived values on the Moscow exchange, MSCI said, citing current pricing in the credit default swaps market. A CDS is a financial contract that allows investors to eliminate possible debt losses that would arise from the default of an issuer of bonds. The five-year CDS probability of default for five of Russia's largest stocks has soared to more than 80% from a pre-war level of just 20%.

"A basic explanation for the disconnect is that investors trading on one market are not trading on the other. Most foreigners are unable to trade Russian stocks, and CDS are only accessible to institutional investors," MSCI said.

"Furthermore, impediments in making bond payments due to sanctions could trigger a technical default, where the firm is not actually bankrupt but is unable to pay coupons or principal for other reasons," MSCI explained.

Although the MSCI highlights that Russian stocks are worthless today based on CDS pricing, there is still a chance that they’ll recover. That would likely be driven by Russia's ability to reopen its markets to global investors and reintegrate its economy into the global financial system.