Page 21 - RusRPTDec20

Another attempt was made to rope retail investors into the stock market with the IPO of VTB Bank, dubbed “the People’s IPO” in May 2007. The bank raised over $8bn is an offer priced at 13.6 kopecks ($0.005), which over 100,000 retail investors bought. Except again with 18 months the markets crashed again, leaving the retail investors holding shares worth half their purchase value. Today the shares are worth 38 kopecks each, which, following the devaluation in 2014 means they are still worth exactly as much as they were worth in the IPO of $0.005 at current exchange rates.
Banks deposits fall out of fashion
The rapid growth in retail investments into stocks, as well as real estate, is being driven by the falling returns from depositing money with banks.
The CBR has cut its prime overnight rate to its lowest level in modern history, which has lead to a mass exodus of bank depositors, reports the CBR, the point where last week the central bank warned that these outflows carries risks for the financial system.
The falling prime rate has lead to commercial banks cutting their deposit rates in parallel. At the most recent peak, the top ten commercial banks were offering a deposit rate of 7.72% in March 2019, but that fell to 5.92% by the start of 2020 and fell again to the current 4.53% as of October. The current return from bank deposits only just covers inflation, which is expect to end this year at 4.2%-4.3%.
The rates on foreign currency deposits have fallen even further and are now close to zero. That has lead to an exodus of those deposits too with RUB635bn ($8.4bn) of outflows this year.
The volume of ruble deposits are still growing and increased by RUB1.1 trillion ($14.5bn) in the first nine months of this year, but regular Russians are more and more energetically looking for alternative investments, the CBR says.
The bond market has been another beneficiary of the change. Since the beginning of 2019, investments of the Russian population in bonds have increased by RUB958bn ($12.6bn) of which 70% are bonds of Russian issuers), which RUB320bn were invested by the population into shares, according to the CBR. This is still significantly less than the amount deposited in ruble deposits over the same period (RUB3.34 trillion), but the order of magnitude has now become the same.
Safe as houses
Outside of the domestic capital market the other big winner from the retail investors hunt for returns has been the housing market. Housing prices have begun to rise fast on both the primary and second market, fuelled by a generous government subsidy scheme​, which was recently extended into 1H21.
21 ​RUSSIA Country Report​ December 2020 www.intellinews.com