Trading – not investing – Newspaper Kommersant No. 51 (7496) dated 03/27/2023

The turn of Russian business to the East in trade and logistics occurred much faster than in investments: the participants of the ACRA financial conference held last week noted the lack of long-term money in the market after the departure of Western investors and, in general, low liquidity, including for hedging foreign exchange risks.

The volume of exchange trading in the yuan in February this year amounted to 39% against 0.3% in February last year, the share of the US dollar decreased to 38% from 88% a year earlier, and the share of the euro – from 21% to 12%, for trading in tenge, lira, Hong Kong dollar and Armenian dram account for less than 1% of the total (calculations by Denis Solovyov from Rosselkhozbank). At the same time, more than 90% of transactions are still carried out through cross-rates against the dollar (this gives a more favorable rate).

Several companies have already placed bonds in yuan – mainly Rosneft (two bond issues of 15 billion yuan, they account for 40% of the total volume of such placements on the local market), as well as Rusal, Polyus, Metalloinvest “. In general, the activity of corporate borrowers in the Russian market increased sharply in the fourth quarter of last year – in December they placed bonds for a record 1 trillion rubles. Market participants expect that sooner or later the Ministry of Finance will also place yuan bonds, increasing borrowing to cover the budget deficit.

The increase in the popularity of transactions in yuan on the local market will obviously be facilitated by the preservation of sanctions and the further reorientation of trade to countries that did not support the introduction of restrictions: turnover with the EU countries (still the largest trading partner of the Russian Federation in 2022), according to European statistics, has almost halved over the year (by December, exports to Russia fell to €4.3 billion, imports to €10.3 billion, while the tenth package of sanctions and an embargo on the import of petroleum products began to operate this year). Turnover with China at the same time grew by almost 30%.

However, another key question remains: will foreign investors from friendly countries be able to become full-fledged participants in the Russian market – in the face of a lack of liquidity, the yield on Russian securities can significantly exceed rates on more open markets. So far, such access in practice is significantly complicated, as is the opening of accounts for non-residents. But no less important is openness, and, on the other hand, the possibility of raising money in the Chinese market (or from Chinese investors in the Russian market) did not seem easy to implement before, but now the process is significantly complicated by the risks of secondary sanctions – in the financial world, their compliance is significantly monitored easier than customs.