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Foreign investors have not had access to the Russian stock
market since Feb. 25, the day after President Vladimir Putin
sent troops into Ukraine, triggering sweeping Western sanctions
aimed at isolating Russia and countermeasures from Moscow.
On Aug. 8, Moscow Exchange will let clients from "friendly"
jurisdictions, those which have not deployed sanctions against
Russia, and investors whose ultimate benficiaries are Russian
trade on its stock and derivatives markets.
Banks and brokerages will need to identify their clients' home
country when registering them with Russia's largest bourse.
A spokeswoman for Moscow Exchange said the number of "friendly"
investors was unknown as they have yet to be registered first,
but their admission should gradually increase market liquidity.
There is no timeline for opening the door to investors from
"unfriendly" countries, she said.
"The stock market is likely to take a bearish trend on Monday
due to the high probability of non-residents ditching the blue
chips," said Andrey Eshkinin, an analyst at Alor Brokerage.
Their return "will create a supply overhang in the short term
and could lead to a decline in share prices," said Natalya
Malykh, head of equities research at Finam brokerage.
But the depth of the highly volatile market decline could be
limited as the share of non-residents from "friendly"
jurisdictions was just 1% of the Russian stock market compared
with the 74% share now controlled by Russian retail investors.
The rouble-based benchmark MOEX has lost 44% of its value so far
this year and is 15% below levels when foreigners last traded on
Moscow Exchange in February.
Russian .IMOEX stock index awaits return of foreign investors:
https://graphics.reuters.com/UKRAINE-CRISIS/akvezkqlnpr/chart.png
AUGUST CURSE VS GROWTH HOPES
Foreign investors' return is a sign of market normalisation and
will boost liquidity, experts say. But the timing is alarming:
August is known in Russia for "black swans", or unexpected
events, such as the 1998 domestic debt default or a war with
Georgia in 2008. There is even a Wikipedia page called "August
Curse".
"August is a traditional time of upheaval for Russian assets,"
said Iskander Lutsko, chief investment strategist at ITI
Capital, who expects the MOEX index to fall by around 15% in the
coming weeks, also pressured by the conversion of depositary
receipts.
Depositary receipts (GDRs) of Russian-companies that were traded
on foreign exchanges and held in Russian depositories will be
automatically converted into shares on Moscow Exchange from Aug.
15 in a bid to reduce foreigners' control over these companies
amid Western sanctions.
This can "create an additional overhang of the supply of such
securities on the market," said Aleksei Potapov, investment
director at UFG Wealth Management in Moscow.
The conversion could lead to selling of up to $18 billion worth
of converted shares in August but a 5% daily limit set for
selling of such shares by the central bank will smooth out the
impact of the sell-off, ITI's Lutsko said.
Once the dust from the sell-off settles, the Russian stock
market can return to gains, analysts said.
Foreigners who bet on Russia's economic recovery could be
interested in holding its stocks, analysts at Moscow Credit Bank
said.
"In the longer term, the Russian stock market looks extremely
cheap and attractive for purchases, with all the risks
associated with it," said Potapov.
(Reporting by Reuters)
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