What will change on the Moscow Exchange with the arrival of non-residents

The beginning of trading for representatives of “friendly” countries announced by the Moscow Exchange on August 8 will not take place. As explained at the Moscow Exchange, this is due to the decree of the President of the Russian Federation signed on August 5, which supplements the system of control and restrictions on transactions involving non-residents.

“In connection with the Decree of the President of the Russian Federation No. 520 dated August 5, 2022, additional configuration of exchange systems is required to provide access to non-resident clients to the stock market. The date of granting access to the stock market will be announced later,” the exchange said in a statement.

We talked with an employee about the possible consequences of the new presidential decree for non-residents and the stock market of the Russian Federation as a whole and the prospects for the stock market in the Russian Federation department economic and financial research CMS Institute Nikolai Pereslavsky.

— What, in your opinion, are the chances for the recovery of the stock market in Russia? What role can it play in the new environment of high uncertainty and an overall decline in private investment?

– It depends on what you mean by restoration. If we are talking about the peaks from October last year, then it is far from certain that the MOEX index will reach them in the next few years – the current geopolitical situation has brought too many losses. The banking sector will write off losses from the exit from the West and curtailment of foreign exchange operations for several more years, metallurgists need to look for new clients in Asia, the oil and gas sector looks better than the rest only until energy prices go down.

Only the IT sector and Internet platforms look more or less promising, but their share in the index is not so large as to seriously influence it. So, it is not worth counting on the fact that the arrival of non-residents will suddenly begin to sharply increase the capitalization of companies. Rather, it will be a reverse process with a trip to the lows of February 24 in the area of ​​1600 points.

— What will “friendly” players do on the Russian stock exchange? What assets may be of interest to foreigners?

– Theoretically, on the bottoms it will be possible to pick up everything. Another issue is that no one knows where the real bottom of the market is now. Previously, dividends were a feature of the Russian market, but now even many top companies do not pay them.

From the point of view of business growth, everything is also very sad, especially if you mean international expansion. Only IT companies and the fertilizer and food sector can be really interesting now, but in the case of fertilizer producers, this story may be seasonal – it is not known what the situation in this market will be next year.

So for now, the most likely actions of non-residents seem to be just dumping the shares that remained on the balance sheets of traders and a set of short positions in the ruble and the market as a whole.

Photo from the Moscow exchange website