Russia is on track to attract a record number of retail investors in 2021 despite an anticipated rise in interest rates, the head of the National Association of Stock Market Participants (NAUFOR) lobby group said.
Russians turned increasingly to stock market trading during the COVID-19 pandemic in 2020 as the central bank cut its key interest rate to a record low, making it less attractive to just keep money in the bank.
Alexey Timofeev, head of NAUFOR, told Reuters in an interview that he expected the growth in the number of people trading to continue and that the number of new retail investors in Russia was likely to match the record rise of 2020.
In 2020, Russia’s largest bourse, the Moscow Exchange, saw a boom with nearly 5 million new retail investors, taking the number of accounts registered to 10 million.
The Saint-Petersburg Exchange, Russia’s second-largest bourse and the main platform for trading foreign stocks, also saw trading volumes of foreign securities reach a record high after the central bank cut rates to an all-time low last July.
“The influx of investors will continue this year. Will the number of accounts double? Maybe. We hope that the overall amount of funds in retail investors’ deposits will increase substantially,” Timofeev said.
NAUFOR says its main purpose is the creation of a favourable atmosphere for investments in Russian financial markets and of conditions for the recovery of the Russian economy.
Russians have some 6 trillion roubles ($79 billion) invested in financial market instruments, according to the central bank. But around 75% of all open brokerage accounts have less then 10,000 roubles ($131.64) in them, according to NAUFOR data.
The rouble-denominated MOEX index gained 8% in 2020, touching all-time highs, making it an attractive investment as the rouble depreciated 16% against the dollar and with deposit rates near 5%. The growth in demand for retail trading reflected a global trend as interest rates plunged, and the pandemic prompted people to spend more time online. Retail investors accounted for 5.6% of the Russian population in late 2020 versus 10.6% in China, 1.4% in Turkey and 0.8% in Brazil.
The Bank of Russia is widely expected to raise rates this year to try to rein in inflation after increasing its key interest rate this month to 4.5% from a record low of 4.25% - the first rate change since last July.
Timofeev said higher interest rates and a market sell-off were unlikely to put brakes on the rise in the number of retail traders.
“Even a possible (downside) correction won’t stop this inflow. In such cases we see very pragmatic behaviour by retail investors who step into the market and increase their investment,” Timofeev said.