Page 66 - Russia OUTLOOK 2022

The global outbreak of inflation was the most notable development of 2021, but if high inflation persists then that is a boon for Russian equities as countries that produce a lot of commodities and have strong financial sectors – both of which Russia has – do well in high inflationary environments.
Emerging markets (EM) investors were already overweight Russian securities in December as the bounce back in 2021 benefited the leading listing companies that have been making record earnings. Moreover, Russian companies pay the highest dividend yields in the world – more than twice the EM average – adding to the appeal of Russian equities. And with global markets awash in stimulus money, large sums found their way into the Russian stock market.
Finally a new development has been the
arrival of Russian retail investors in the
Russian stock market. Seven years of rate cuts by the Central Bank of Russia (CBR) meant bank deposit interest rates had fallen to the point where savings make almost no returns so retail investors turned en masse to the Russian stock market in 2021 looking for a better return. Retail investment volumes went up seven fold and retail investors now account for some 40% of the turnover on the stock market, according to some estimates. However, by the end of 2021 after a series of rate hikes some retail investors were returning to bank deposits as the market sold off in November and December.
All of these trends are likely to continue in 2022. Despite the 20% sell off in December due to heightened geopolitical tensions and talk of war with Ukraine, analysts believe those fears will fade as 2022 gets underway and the market will bounce back.
66 RUSSIA Russia OUTLOOK 2022 www.intellinews.com