Russian Investors – new trends

THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 22, 2007
  

The growing Russian stock market and the profitability statistics on the mutual investment funds (80% profitability in 2006) radically changed the investment mentality of Russians. Different public opinion polls show that the traditional Russian way of keeping the money in the pillows and tins is already away. Brokers and investment bankers complain on the streams of babushka in their offices looking to get at least some GAZPROM or ROSNEFT stock. In 2006, the total volume of trades in non-government securities on the MICEX Stock Exchange grew 3.2 times over 2005 and reached 20.38 trillion rubles ($754.9 billion). The average daily volume of transactions in stock assets reached 82.5 billion rubles (3.1 billion dollars) a day. This week MICEX has registered its 250,000th individual investor. Transactions made by individual investors account for about 1/3 of the average daily volume of transactions on the MICEX. And this recognized globally – recently JP Morgan Chase Bank assigned its Quality Recognition Award to MICEX.
A steady job and a mutual fund is still the best defense against social security
Last January the Russians brought to open mutual investment funds about 2.7 billion roubles – this is one third more than in 2006. One of the opinion polls showed that the number of Russian that understand the meaning of “the share” and that are ready to invest in the shares increased over the year from 1% to 6% - making about 9 million.

Investors have very short memories (Roman Abramovich)

Naturally these developments are indeed of a major concern to the regulatory bodies. Recently the head of the Russian Federal Financial Markets Service (FFMS) expressed his concern about possibilities of the “China syndrome”. This week his deputy made an announcement that FFMS starts a two-year program aimed at the education of population on the stock market potential and associated risks. The officials are extremely concerned with adventurous character of the Russians (we have witnessed a lot of this in the 90-ies with MMM financial pyramid, now we are watching the consumer credits fever), that do not understand clearly the swings and roundabouts of the stock market.
The key to making money in stocks is not to get scared out of them
Meanwhile we are looking forward for the “popular IPOs” that are supposedly to develop very rapidly. Now we just survived the Sberbank’s saga – it is reported today that 46,270 bids were received from Russia’s physical persons, despite rather high price for the share. Of course this is lower that in ROSNEFT case (115,000). This week we have heard of the proposal for the next “popular IPO” - the AEROFLOT air carrier (51.17% government-owned).