Millions of Russians have started to transfer their savings in the shares of Russian companies bonds, thus helping the market, which for long time was at the mercy of moods of foreign investors.
The current campaign to reduce interest rates by Central Bank has led to a decrease in the base interest rate from 17% five years ago to 4.5% last month — a record post-Soviet period, calling into question the attractiveness of Bank deposits. In addition, President Vladimir Putin announced in March the introduction of the 13 percent tax on income from Bank deposits above 1 million rubles ($14,000), and this was done in order to help the state obtain funds for the fight against coronavirus.
The result has been an unprecedented growth in the stock market the number of investors-fans that is reminiscent of a similar craze in the United States, the United Kingdom and in China, potentially this situation can change how markets work in the country.
In June of this year the share of retail investors accounted for 42% of total retail transactions, an increase of 34% compared to last year’s figures. More than 5.3 million of Russians today have brokerage accounts to trade stocks on the local stock market, and their number since January has increased by 1.5 million.
“Today we see a completely different number of retail investors than before, — said Andrei Braginsky, the official representative of the Moscow exchange (Moscow Exchange). — People are looking for alternatives to maintain or increase their money.”
A significant portion of this new capital comes from savings Bank deposits before the introduction of a new tax on profits from interest on deposits, which will take effect at the end of this year and will affect about 45% of Russian deposits.
Online lender Tinkoff received in addition this year of 1 million retail investment accounts, now their total number is 2.4 million — the highest figure in Russia. The Chairman of the Board of the Bank Oliver Hughes (Oliver Hughes) claims that it is only the beginning.
“[In this country] now just over 5 million accounts, but can in the near future the number of brokerage accounts in Russia to increase to 10, 15, 20 million? Of course. As it should be. This is a serious impetus for capital markets in Russia”, — he added.
Khisamov Rasim (Rasim Hisamov), working in Moscow, the consultant, had never invested their money in shares, but recently, after the Kremlin RAID on Bank deposits, I decided to dive into this. “I have minimal knowledge of the stock market, but I have chosen exchange traded Fund, because it provides a good diversification for my investments, — he has told in conversation with the correspondent of the newspaper “financial times”. — Currently I have invested about 400 thousand rubles, but I chose a long-term strategy, and therefore plan to continue investing”.
24-year-old analyst Ivan Shobik (Ivan Shobik) working in one of Russian banks, provides further options to generate income from assets compared with the interest received from Bank accounts. “Today we already have a tax on Bank deposits,” he added. According to Mr. Shabica that he had previously signed a short term deal, but now the “acquired shares for a long time and did it as an investor and not as trader”.
Its impact is already noticeable. Russian financial markets for a long time has been dependent on the inflow of foreign funds and often demonstrated a sensitivity to the shifts in geopolitics. However, in March, when foreign capital began to flow out of Russia in the global trend of avoiding risks, internal funds have helped to support prices.
According to the Central Bank of Russia, on 1 June, Russian banks had retail deposits in the amount of 448 billion dollars, while the total free flow of the stock index of the Russian market (MSCI Russia Index) is less than 200 billion.
In this situation, if only 15% of deposits will be sent to the stock market, this would constitute about one third of the free flow of the Russian stock index, said Luis Saenz (Luis Saenz), one of the leaders of the division of shares in the London company BCS Global Markets. “Such a large volume will change the rating of Russian shares”, — he added.
The share of Tinkoff, Sberbank and VTB account for almost 90% of retail brokerage accounts. VTB Bank also plans to create a retail investment platform, and implement this project it will be together with Yandex, Russia’s largest technology company. This was announced people relevant to this transaction.
The growth in retail investment — “it is a question of infrastructure and access,” said Mr. Braginsky of the Stock exchange. “All this can be done online, and people who had spent at home in the past three months, I come to the conclusion that it is very easy to start an account and start investing. Just a few years ago, nothing like this has not happened”.
The Central Bank of the Russian Federation plans to take steps to reduce risks for inexperienced investors. Currently, Parliament is discussing a law that will allow all investors to purchase a limited number of high quality stocks, bonds, but they will have to pass a test on knowledge of the market, and only after that they will be allowed to use more complex tools.
“Now everything is fine, people want to be available all the tools, but the loss means they forget that they had acted on their own and expect to recover damages,” — said in may the head of the Central Bank Elvira Nabiullina.