Money from someone else’s helicopter

One of the new phenomena in the Russian financial market since 2020 has been the extremely rapid growth in investments of individuals – residents of the Russian Federation in foreign shares and bonds. During the pandemic months, tens of thousands of Russian households invested hundreds of billions of rubles in other people’s securities, mostly withdrawn from foreign currency deposits. The Central Bank is still restrained about the new phenomenon and says that the country’s population for the first time de facto directly participates in the section of “support packages” for the US and EU economies, both pluses and minuses.

The Central Bank notes in the Financial Stability Review (.pdf) for the last quarter of 2020 and the first quarter of 2021 a significant change in the nature and weights of risks in the financial system, although as the COVID-19 pandemic gradually emerges from the entire world and Russia as a whole, the cumulative the risks have become less. The Bank of Russia review demonstrates not only the consequences of significant distortions in the financial markets caused by the coronavirus crisis (both endogenous for the Russian economy and imported ones) and outstripping forecasts of recovery growth (provoking increased inflationary pressure), but also largely the strategies of the population, which, both it turned out that he was not averse to capitalizing on the consequences of stimulating markets by the monetary authorities of other jurisdictions.

At a press conference at the Central Bank, Ksenia Yudaeva, First Deputy Chairman of the Board of the regulator, stated that part of the Bank of Russia’s assumptions about asset bubbles in the Russian market, created by a non-standard situation with the pandemic, has already become a reality that requires a direct response from the Central Bank. In particular, a decision was made to increase macroprudential markups on new unsecured consumer loans to the values ​​in force before the pandemic, as well as markups to risk ratios for mortgage loans with an initial payment of 15% to 20%, depending on the value of the borrower’s debt burden.

At least in the mortgage market, the Central Bank unequivocally considers the situation to be overheated and is forced to intervene.

However, the consequences of the recovery of financial markets from COVID-19 are more diverse: for example, the Bank of Russia report analyzes in sufficient detail the increased inflows of funds from individuals to the stock and bond markets of non-resident companies.

The dynamics of Russian citizens’ investments in foreign stocks and bonds since the beginning of 2020 is really impressive. According to the Central Bank, in March 2020 (counting from the beginning of this year), individuals invested 52 billion rubles in foreign shares, and in December 2020, already 346 billion rubles, and December was the first month when the current investments of individuals in foreign shares outstripped investments in Russian securities. This did not stop there: in March 2021, this figure reached 566 billion rubles – this, according to the Central Bank, is 16% of all investments of individuals in shares (in January 2020 – 4%). Foreign bonds are not so popular: the net inflows of individuals’ funds accumulated there since the beginning of 2020 amounted to 16 billion rubles in March 2020 (in the first month of the pandemic), by the end of 2020 – 128 billion rubles, by March 2021 – 156 billion rub. The growth of investments of individuals in bonds of Russian issuers was faster, now 459 billion rubles have been invested in them since the beginning of 2020. Nevertheless, the share of investments in foreign bonds of individuals of the Russian Federation is greater than in shares: over five quarters, this share increased from 21% to 24%.

Sources of individuals’ investments in foreign stocks and bonds give the Central Bank reason to see in what is happening not only risks: for the most part, these are funds withdrawn by residents from foreign currency deposits in the Russian banking system, and this is less than since the beginning of 2020 from foreign currency deposits to ruble deposits. … At the same time, for all five pandemic quarters, the share of valuation of individual savings – 22% – has not de facto changed.

In fact, we are talking about the fact that part of the population, not satisfied with the yield on deposits (especially foreign currency) and expecting the strengthening of the ruble, finally decided to master investments in foreign stocks (and to a lesser extent bonds) through the channels of the St. the pre-existing channels of the Moscow Exchange.

The statistics of the first three quarters of 2020 show that in St. Petersburg, the median investments of individual investors in conditional “Apple shares” were within the range of 2 million to 10 million rubles – that is, we are talking about a relatively mass investor. These are many tens of thousands of exchange clients who de facto decided to get their share of the inevitable growth of the stock market amid stimulation of the US, EU and Asian economies with “aid packages” and super-soft monetary policy of local regulators. Obviously, there are citizens of the Russian Federation who invest in the same securities through other jurisdictions, but the Central Bank does not see them well. The Bank of Russia has a restrained attitude to the “discovery of America” ​​by Russians: on the one hand, it is against any tax discounts on such investments; positive diversification of household investments, and the investments themselves are at least transparent for the Central Bank and make money for brokers and infrastructure companies of the Russian Federation.

The process, according to the Bank of Russia, is still “at an early stage” of development. Note that this is a super-stormy start by any standard: for the two reporting quarters, the investments of individuals in foreign shares and foreign bonds, although not much, exceeded the growth of individuals’ funds on ruble deposits.

Dmitry Butrin