Page 20 - bnemagazine bne_December 2021_20211203.pdf

20 I Companies & Markets bne December 2021
From blue chips to green energy, new
SPB index reveals
the complex tastes of Russian retail investors
Theo Normanton in Moscow
Anew index has been launched on the St Petersburg- based SPB Exchange harnessing the surging domestic retail investment market. Trading started on the SPB100 Index, which records the performance of prime stockpicks from Europe, America and Asia in the portfolios of Russian retail investors.
As followed by bne IntelliNews, SPB Exchange, already Russia’s leading platform for the trading of international securities,
is also driving a retail investment boom in Russia. Now it will begin to publish the results of 100 of the most popular foreign stocks in the portfolios of Russian investors, according to a press release by the Exchange.
The best of all worlds
Companies represented on the SPB 100 index are a diverse mix of industry giants from outside Russia. Main drivers include Chinese titans like Baidu and Alibaba, as well as NASDAQ’s classic FATANG tech stocks (Facebook, Amazon, Tesla, Apple, Netflix and Google). Big pharma and biotech companies will also feature, along with retailers, travel firms and even spaceflight company Virgin Galactic.
The weighting factor of each stock in the index corresponds
to its share in the average portfolio of a retail investor who traded on SPB Exchange in the previous quarter. The index can also boast of being well diversified: the top 20 stocks
don’t represent more than a 60% share, and each issuer has a concentration limit of 10%. Liquidity was also an important criterion for the index, as Aleksandr Diakovskiy, managing director of the SPB Exchange, explained in a livestreamed launch presentation: “The process of choosing the index was very simple. We took all the stocks traded at our bourse – approximately 1,800 of them – and put them through a fairly strong liquidity filter. The 500 best picks were arranged in order of their size in the portfolio of the average retail investor. The 100 most popular shares make up the SPB100 index.”
To be included in the SPB100, therefore, a stock must have been trading at least 2/3 of the time since the last rebalancing period, and also show a minimum average daily turnover of $50,000 on the SPB Exchange. This is designed to ensure that the SPB100 can accurately reflect real-time changes in the
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Comprised of popular foreign stockpicks, the St Petersburg Exchange's new SPB100 index measures the performance of the average retail investor's portfolio.
behaviour of investors, with an update every second. In the launch presentation, Jacques der Megreditchian, chairman of the board of directors of SPB Exchange, emphasised that “this is important to all market players, because it allows them to understand where the market is positioned. You can look at individual companies, but if you want a more general picture, this index will be an important aspect of that.”
Surfing the retail investment wave
The ability to easily trade international stocks has opened
up a huge new market in Russia. Reforms to capital markets undertaken in 2011 successfully increased domestic trading on Russian exchanges, but they also left a gap in the market. Since the Russian ruble is built into the IT system of the Moscow Exchange (MOEX), traders of foreign stocks are exposed to additional risk through FX fluctuations. SPB Exchange has ironed out this inefficiency by offering foreign securities
in exchange for dollars, effectively negating the FX risk at
the time of trading. The consequence has been sustained growth of the international stock offering at the SP Exchange. Whereas over 200 foreign stocks can be traded on MOEX,
SPB Exchange traded over 1,900 international securities as
of June 30, 2021.
In 1H2021, total trading volume on the bourse reached approximately $206bn, representing an increase of 356% from approximately $45bn in 1H2020. In an exclusive interview with bne IntelliNews in July, SPB Exchange’s founder and CEO Roman Goryunov put some of the exchange’s recent success down to the flexibility it offers investors – open for trading 19 hours a day. “The time difference means that the US markets only open in the late afternoon in Russia, and people don't want to trade only at the end of the day,” said Goryunov.
However, SPB Exchange’s growth has also been supported by a shift in the behaviour of Russian markets. Retail investing has taken off over the last 10 years as ultra-low bank account interest rates have encouraged Russians to invest their wealth in new places. Rising real wages and the appearance of investment platforms driven by fintech solutions (like Tinkoff Invest and SberInvestor) have driven increasing numbers
of Russians to give investing a go, and Russia was in the top five countries by global investment app downloads at the