Page 77 - RusRPTFeb22

the United States and NATO in Geneva and Brussels, then on January 18, the day of the record collapse, there was no negative geopolitical news at all. The market was already falling by inertia: “The problem is that there are no triggers yet that would push it up,” Elbek Dalimov, head of ATON stock trading, told The Bell on Tuesday.
Retail investors have been the main victims of the volatility. Analysts agree that the sell-off was started by foreign funds, but the record crash on January 18 was triggered by massive margin calls from Russian private investors, who traded with leverage, trying to buy the drawdown - but as a result lost money. Trading volume among private investors increased by about 45% between January 17 and 19, Igor Fedosenko, head of sales and client operations in Promsvyazbank's wealth management department, told The Bell.
The number of unique individual clients on the Moscow Exchange almost doubled over the past year, from 8.8mn to 16.8mn. At least one transaction, amounted to 2.6mn people (40% more than a year ago). This means that stock market fluctuations can hardly be considered by the Kremlin as a significant political problem: the number of actively trading people is less than 2.5% of registered voters in Russia.
For the 1.2mn new active retail investors who joined the Moscow Exchange in 2021, the current foreign policy crisis is the first experience of such acute volatility and sharp falls. Based on the experience of previous drawdowns in the market, the main exits from products and market instruments will begin when the market recovers and “newbie” investors see a zero result, Andrey Rusetsky, Managing Director for Investments at PSB Management Company, suggests. “In general, an investor who has survived a drawdown of -20% or more (“bearish” phase of the market) can consider himself to have passed the risk tolerance test. Those who decide to exit have probably chosen a product that is not suitable for them in terms of their attitude to risk, and it is better for them to invest in conservative instruments (deposits),” the manager argues.
Moscow Exchange has published retail investor statistics for December.
Local retail investors purchased RUB57bn worth of Russian stocks. Domestic mutual funds also saw significant inflows, and data from investfunds.ru suggests that they brought RUB23bn into the Russian equity market. Thus, in total, local investors brought RUB80bn ($1.08bn).
Given that there were no placements in December, the supply-demand balance looks quite straightforward: foreign institutional investors most likely withdrew an equivalent amount from the Russian stock market. This looks logical to us, given the abundance of concerning geopolitical news. In the meantime, it shows that local investors are treating these risks as less serious and are ready to buy the dip, especially when the RTS index trades well below 6x P/E and at a 10% dividend yield.
The stock-level data suggests that individuals were primarily buying Sberbank and Gazprom, names that are typically perceived as sanction proxies. The share of Sberbank commons and prefs in retail investors’ portfolio rose from 21% in November to 23% in December, while the share of Gazprom increased from 28% to 32%. That said, local investors remain buyers of last resort for foreigners spooked by political developments.
77 RUSSIA Country Report February 2022 www.intellinews.com