New games with old risks

Tatyana Edovina, correspondent of the Economics Department, finds out the rules of the game in investments in “friendly” markets

The Russian market is in a unique situation: retail investors are now seen as the main, if not the only, source of long-term money—this is the concept of “financial sovereignty” introduced by the government last week (which includes an increase in equity market capitalization from 22% of GDP to 32% of GDP). %). However, investment opportunities abroad for such investors are expanding slowly (this applies to investing through Russian brokers and management companies) and is accompanied by a complication of withdrawing funds outside the Russian Federation if a citizen plans to invest through foreign sites (last week, Raiffeisenbank announced additional restrictions on SWIFT transfers, and the branch of MTS Bank in Abu Dhabi is waiting for the license to be revoked).

Another problem is the relative closeness and overregulation of the markets of “friendly” countries themselves. China is considered as the main direction of investments in securities outside the Russian Federation, but access to its market is still limited. To trade securities on the exchanges of mainland China, the status of a qualified foreign institutional investor is required, its obtaining is associated with the passage of a number of regulatory procedures, and among Russian players, the presence of QFII is rather an exception. An alternative is to invest in shares of Chinese companies listed on the Hong Kong stock exchange. This instrument is more accessible, however, only a small part of traded securities is available to Russian investors, and the risks of increasing pressure on depositories cannot be considered completely removed (this is also related to the Central Bank’s restrictions on operations with such securities for unqualified investors).

Kazakhstan remains a closer destination (at least within the EAEU neighborhood), but the country’s exchanges still cannot boast of high turnover, and infrastructure organizations are extremely careful in assessing the risks of secondary sanctions. Other markets, including Iranian and Indian ones, remain virtually inaccessible to Russian investors.

However, those wishing to invest in the securities of issuers from “friendly” countries may be concerned not only by the conditions of access, but also by the key characteristics of these markets: in addition to the new country specifics, potential investors are faced with familiar problems, often there is not enough information to evaluate securities (according to it is closed to many Russian issuers due to the risks of sanctions), and growth opportunities are closely linked to the actions of regulators – as in the case of Alibaba, which received the green light for an IPO three years later and only after the division into six parts.