Page 107 - RusRPTAug22

8.3 Stock market
8.3.1 Equity market dynamics
MOEX starts a class action. The Chairman of the Supervisory Board confirmed The Moscow Exchange has started a class action lawsuit due to EU sanctions against the National Settlement Depository (NSD). The European Union has blocked other people's assets, he said. The NSD came under sanctions on 3 June. As a result, foreign securities of Russian residents hung there for RUB6 tln, the Central Bank estimated. The EU document stated that NSD is the largest securities depository in Russia by market value and plays a significant role in the functioning of the Russian financial system and its connection with the international financial system. In addition, in March of this year, operations with NSD were suspended by the European depository Euroclear, and later by Clearstream. However, European depositories have been blocked since the end of February, and payments were made, in fact, in manual mode.
CBR suggests banning foreign shares from mass investors allowing only those with liquid assets above $0.55mn to diversify geographically by themselves, reports Interfax and other media. Russian Central Bank has reportedly indicated demands to block domestic non-qualified investors from buying shares of foreign companies on Russian exchanges as well as increase qualification requirements for investors, specifically raise the financial threshold from Rb6mn ($109k) five-fold to Rb30mn ($545k). Furthermore, the CBR has already reportedly instructed brokers to limit buying of foreign shares for non- qualified retail investors including via mobile apps.
Positive effects for Russia stock liquidity are far from guaranteed. If implemented, the mass retail investor will be further limited in diversification abilities from domestic instruments. The new asset size requirements above $0.5mn pushes qualified investors closer to HNW category (that is already heavily targeted and served by the wealth management industry) and away from retail brokerage and mass investments. While one may speculate that limiting investment opportunities for retail may improve flagging liquidity of the domestic stock market post February 24, it is the foreign shares investments that had positive spillover liquidity effects by bringing more investors on broad financial markets and helped domestic instruments in previous years, not the other way around. Finally, we would not be surprised to see more products from the asset management industry targeted to bridge the gap of lack of geographical diversification for domestic investors, if infrastructure risks are properly managed. Hence, potential positive liquidity effects for the Russian stocks are far from guaranteed.
Law to allow faster track conversion of DRs. The Duma, adopted draft law No. 116264-8 on June 29th, 2022, containing rules allowing the conversion of depository receipts into the underlying Russian shares without a need to go through non-Russian depositary banks, custodians, brokers, and other similar institutions.
107 RUSSIA Country Report October 2020 www.intellinews.com