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November. This number suggests massive inflows from foreign investors, say analysts at BCS GM.
As bne IntelliNews reported Russian retail investors have been piling into the local securities markets looking for an investment that pays better than the tradition bank deposits after the Central Bank of Russia (CBR) has continuously slashed the prime rate over the last few years to only 4.25% now. With inflation running at 4% in November and expected to end the year at circa 4.2%, bank deposits returns continue to be strongly squeezed.
The investment has seen the market rally, but since the middle of November non-resident investors have start heavily buying Emerging Markets (EMs).
“The numbers for November represent a departure from the trend seen over the last two years. However, the retail outflows are easy to explain. Vaccine-induced optimism has prompted global investors to start picking up cyclical assets, including Russian stocks. The RTS Index jumped 23% in November,” BCS GM said in a note. “For every buyer there needs to be a seller, so local investors appeared on the offer side. We estimate foreign inflows at $2.5bn during the month, as retail investors were not the only sellers: there was also a $1bn IPO. Overall, this development is good news for the market, as foreign purchases leave local retail investors with plenty of cash that they can deploy at any moment.”
The number of retail brokerage accounts continued to expand rapidly and now exceeds 8mn. This has further increased the capacity for local investors to buy more stocks.
And the money keeps coming. An estimate $5.6bn came into EM equities in the week to December 2, following a similar sum the previous week, according to EPFR Global data, as cited by BCS GM.
“GEM funds saw $2.2bn inflow (0.28% of total assets under management in global EM funds), following the previous week's $2.4bn. China saw the bulk of the inflow at $3.5bn (0.46%) [in the first week in December] and $3.9bn the week prior. EM equities have seen inflow of nearly $25bn in the last four weeks, bringing their YTD outflow down to $17.9bn, or 1.4% of initial AUM,” BCS GM said in a note.
The largest share of the inflows to EM markets is headed to China, which traditionally attracts international investors interest first during an EM rally. Moreover, China’s economy is expected to outperform in 2021 growing by 2% according to the latest World Bank’s Economic outlook released in October.
Russia has seen four consecutive weeks of net inflows, albeit more modest amounts than the other EM markets: $133mn (0.26%) in the first week of December following $156mn the week prior. That broke down to $81mn via EM funds, $49mn (0.52%) from Russia-dedicated funds and $22mn (0.32%) from global funds, according to EPFR Global data.
11 RUSSIA Country Report January 2021 www.intellinews.com
