Page 100 - RusRPTMar21

8.3 Stock market
8.3.1 Equity market dynamics
Russian retail investment into stocks and bonds has finally taken off after decades of effort by the financial authorities. In 2020 retail investors put RUB638bn ($8.6bn) into foreign stocks and bonds, according to Central Bank of Russia (CBR), Tass reported on February 16.
Russians have been moving money out of their long preferred store of wealth – high interest deposit accounts with domestic banks – after a series of interest rate cuts have reduced the returns to insignificant amounts and have been looking for investments with a bigger return.
The CBR kept interest rates on hold at 4.25% at its first policy meeting this year last week and CBR governor Elvira Nabiullina made it clear there would be no more cuts in the near future. But the margin that banks add to term deposits remains small and with inflation running at over 5% at the moment a deposit at a bank barely makes any return for the depositors.
At the same time ongoing reforms at the Moscow Exchange (MOEX) has made it easier than ever for Russians to invest in stocks and bonds listed on foreign exchanges, via the local exchange. MOEX reports that it has over a million retail investors that have completed at least one trade last year.
Russian retail investors have become a force on the local market that is providing some stability to the market due to the depth of the pool of local money. Retail investors now account for some 40% of the turnover on the exchange according to some estimates and tend to buy into the dips sooner than foreign investors who have typically made up half of the holdings in the past.
The CBR said despite the growing interest of citizens in foreign securities, investments in securities of Russian issuers still account for 85% of the population's investments as of January 1, 2021.
The $8.6bn invested in foreign assets in 2020 is twice the amount of money withdrawn from foreign currency accounts at Russian banking deposit accounts last year. That means Russians are investing a portion of their income into stocks and bonds, the CBR said.
"The purchase of foreign securities can be partially explained by the redistribution of households' savings in foreign currency from deposits to investments with higher expected returns," the regulator said.
"At the same time, most of the inflow was provided by investments in foreign shares, which indicates the emergence of a risk-oriented strategy in the behavior of the population, in addition to traditional ways of investments in debt instruments,” the CBR added.
100 RUSSIA Country Report March 2021 www.intellinews.com