Russia’s falling interest rates have fundamentally changed the way the average Russian thinks about their life savings. Following the years of hyperinflation during the 90s the interest rate sensitive Russians have traditionally sought out banks that pay the highest deposit rates in an effort to at least slow the attrition from inflation.
Now the game has changed. Inflation has fallen to a post-Soviet low of about 2.4% and the Central Bank of Russia (CBR) has cut its rates to 7.25% so returns from deposit accounts have fallen as well. After more than two decades the average Russian punter has started to cast about for an investment that has better returns.
The government is also keen to tap into the tens of billions of dollars worth of “mattress money” most Russians keep in reserve against fresh crises. It has launched tax beneficial “investment accounts” to encourage people to start salting something away for their retirement. Another initiative has been the float of “the people’s bond” – a state bond that targets retail investors.
Russia’s leading brokerage has launched new investment products that allow retail investors to buy into stocks, bonds and other securities and seen the volumes soar. It is still early days but a retail investment culture is finally beginning to emerge in Russia.
bne IntelliNews’s editor-in-chief Ben Aris talks to Vyacheslav Smolyaninov, the head of research at BCS, about the changing shape of Russia’s retail investment universe.
Ben Aris, editor-in-chief, bne IntelliNews
Vyacheslav Smolyaninov chief strategist and deputy head of research at BCS Global Markets, the biggest brokerage in Russia