Inflow of Russian retail investors to MOEX could be misleading

Inflow of Russian retail investors to MOEX could be misleading
Russian day traders are becoming increasingly important to Russia stock market, but most of the individual accounts are inactive
By bne IntelliNews February 19, 2020

Hundreds of thousands of Russians have opened individual retail accounts with Moscow Exchange (MOEX) to buy and sell shares, but most of the accounts are empty and inactive the exchange said on February 18.

The sharp rise in the number of domestic retail investors that flocked to Russian equity markets as interest rates in the banking sector decline could be misleading, as large numbers of the investment brokerage accounts are not actually being used, Vedomosti daily reported.

As reported by bne IntelliNews, big hopes are placed on retail investors for further boost in Russian equity markets, as they are anticipated to boost liquidity and accentuate sharp price movements.

Indeed, as of end of 2019 the number of retail accounts on Moscow Exchange almost doubled to 3.9mn, with about 1.6mn accounts being individual investment accounts (ISS). Similar dynamics are seen on the St Petersburg stock exchange.

However, two thirds of such accounts are not being funded and sit empty, Vedomosti claims citing the survey by the National Association of Equity Market Participants (NAUFOR) of 95% of the brokers on the market.
 
While the ease of registration (70% of ISS were opened online) drives curious retail investors to open the accounts, it does not necessarily lead to an increase in investment activity, the survey finds. The share of funded investment accounts in 2019 declined from 40% to 33%, and for ISS from 45.5% to 27%.

Some investors keep ISS accounts empty as rights for tax exemptions accrue only after three years after opening the account.

Nevertheless, private investors on various types of brokerage accounts held RUB3.2 trillion by the end of 2019, a 1.5-fold increase, out of which ISS accrued RUB220bn. But the growth is expected to decline by the analysts surveyed by Vedomosti.

 

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