Foreign investments are reportedly met with a lukewarm response, as per Kommersant's latest report.
Revamped Article:
Haven't seen much action in the shares of foreign companies listed on the Moscow Exchange's over-the-counter market, according to "Kommersant." The May trading volume clocked in at a meager 562 million rubles.
On April 28, the Moscow Exchange threw open trading for 127 foreign securities that had been off-limits since the spring of 2022. These included popular U.S. stocks such as Apple, Amazon, Bank of America, Citigroup, Microsoft, Tesla, Alphabet, Nvidia, and Visa. Only qualified investors can invest, while non-qualified investors can only sell.
Data from the financial market suggests that over-the-counter trading was initiated partly to enable would-be public servants to sell off their foreign assets, which are prohibited for them to own. Anton Imennov, senior partner at Pen & Paper law firm, concurs, explaining that officials are legally barred from holding foreign financial instruments.
Market participants, like Andrei Smirnov of Renaissance Capital, confirm the niche and specific nature of this segment. They point to uncertainty about the future of these securities, the lack of access for non-qualified investors, and hefty tax liabilities as primary reasons for investor inactivity. Ivan Vlasenko of Alfa Bank adds that the large discounts buyers face are another deterrent.
Meanwhile, the St. Petersburg Exchange is exploring the possibility of starting trades for these blocked foreign securities by the end of May. A potential meeting on the issue is expected in early June. However, experts predict that while trading volumes might be higher on the St. Petersburg Exchange compared to Moscow, overall trading activity for U.S. securities remains low.
This low trading volume can be attributed to several issues:
- Market Volatility and Sanctions: The sanctions affecting Russia and the Moscow Exchange have created a volatile market, discouraging active trading in U.S. stocks.
- Currency Instability: The Russian ruble's volatility increases currency risks for investors traded in rubles.
- Limited Availability and Market Maker Role: The Moscow Exchange offers a restricted number of U.S. stocks, traded in rubles, which may limit liquidity and deter some investors.
- Lack of Issuer Agreements: The exchange does not have agreements with U.S. share issuers, potentially reducing confidence from investors who prefer securities directly supported by issuers.
- Competition from Other Exchanges: The St. Petersburg Exchange offers an alternative platform for trading these U.S. stocks, potentially fragmenting trading activity and reducing volumes on the Moscow Exchange’s OTC section.
These challenges, combined with ongoing geopolitical tension, contribute to the lackluster performance of the Moscow Exchange’s over-the-counter market for U.S. securities.
Despite the ease of trading for some foreign securities like Apple and Tesla on the Moscow Exchange, qualified investors remain the only ones allowed to partake, due to uncertainty about the future of these securities, large tax liabilities, high discounts, and a volatile market affected by sanctions and currency instability. The limited availability of U.S. stocks, lack of support from issuers, and competition from alternatives like the St. Petersburg Exchange further deter investors, contributing to the poor trading performance of personal-finance opportunities in this sector.
