Consumer Equity Investing – Historic Changes in Russia

THIS POST WAS ORIGINALLY PUBLISHED APRIL 17, 2007

Consumer Equity Investing – Historic Changes in Russia

One of the session of the last IPO Congress was focused on the profound changes in the equity investment scene in Russia. Indeed, as Alexander Oslon, Public Opinion Foundation, President, noted: 2006 was the crucial point in the history of Russia – the birth of consumer equity investing. Many Russians realized that investments in equities may be much more profitable than the bank deposits.
The new strata of Russian population is emerging at a very rapid pace – consumer investors. This due to the following reasons:
A. New challenges:
- devaluation of U.S. dollar (which was for a long time a major vehicle of savings)
- high real-estate prices
- low deposit interest rates at the banks
- prices and tariffs hikes
- limitations for development of small businesses

B. Incentives for equity investing :
- growth of real income
- history of equity ownership (GAZPROM in the past, ROSNNEFT shareholders in the past months made profit that is higher than the banking interest rate)
- stability of political regime
- popularity of equity investments 

© Public Opinion Foundation

6 million of potential Russian investors may be divided into four groups:

- Bears – 6.2% - the ones that are striving to re-sell equities, to have high profitability at low level of security

- Rentiers – 68.2% - want to have a stable, relatively high income at high level of security

- Bears/Strategists – 11.9% - long-term buy in view of increase of market value

- Rentiers/Strategists – 13.7% - prefer high dividends at low level of security

Thus, the Public Opinion Foundation makes the conclusion – equity investing is now the most viable and secure way of preserving of small household capital.

Another part of presentation was made by the Salvador D company that studied the phenomenon of the so called “people’s IPOs”. It was stated that the “people’s IPOs” are in essence another round of massive privatization campaign. In this view the government gets:
- Emerging of a massive strata of proprietors
- A new anti-inflation factor
- Political loyalty of population

An interesting definition of the SBERBANK’s “people’s IPO” was pronounced – it was “redistribution of ownership among the narrow group of wealthy”. In fact such statement describes the reality of the scheme.