The state Duma will soon begin work in the autumn session. Other bills may be considered amendments to the law “On securities market”, which was prepared by the Central Bank of Russia. Representatives of the Central Bank propose to introduce several categories of investors: the lower the category, the fewer financial instruments, the investor has the right to invest. So, on the idea of the Central Bank, it is possible to protect non-professional investors — ordinary people who decided to invest their savings in securities. But market participants there are several objections, one of which is the prohibition for non-professional investors to invest in the shares of foreign companies.
Who are unskilled protected investors? It is ordinary citizens that have not passed special training and have a sum for investment is not more than 400,000 rubles — in fact, most mass segment. The Central Bank considers that the prohibition to invest in foreign companies protects them from excessive risks. The alternative — a securities of Russian companies, bonds and some more tools.
The risk of becoming twice as rich
In the technology market there is an acronym GAFA, sometimes GAFAM. This is the first letter of the name of the largest U.S. technology companies — Google, Amazon, Facebook, Apple and Microsoft. After the adoption of the amendments to the law of unskilled protected investors the shares of these companies through the Russian brokers will be impossible to buy.
Let’s see what would happen to the amount of 100 000 rubles, if five years ago (in September 2014) we would have put them in GAFAM:
Shares of Google rose by 97% from $584 to $1151. The amount of investment would have grown to 197 089 rubles;
Amazon shares rose by 405% from $346,38 to $1749,62. The amount of investment would have grown to 505 115 rubles;
Shares of Facebook increased by 130% from $77,26 to $177,75. The amount of investment would have grown to 203 067 roubles;
Apple shares increased by 105% from $98,97 to $202,64. The amount of investment would have grown to 204 748 rubles;
Microsoft shares rose 190% from $to 45.91 to $133,39. The amount of investment would have grown to 290 546 rubles.
It turns out that investing in the largest technology companies in the US, we are in the worst case increased their investments almost twice. It’s not very risky.
Of course, the financial market is not so rosy. For example, shares of the electronics manufacturer Xiaomi after the release on the Hong Kong stock exchange in July 2018 fell to the present more than doubled. Or popular messenger Snap, which at one time refused to sell Facebook’s shares since the IPO in March 2017 fell to date is 42%. But with the same success it is possible to give examples of companies whose shares have risen by hundreds of percent. For example, Nvidia shares showed an increase of 741%.
For greater objectivity, let us consider stock market indices, which take into account changes in the value of shares of a large number of companies. On Nasdaq traded almost most technology companies. It has several indexes in the Nasdaq Composite index includes all companies on this exchange. In five years it grew by 69% (from 4582,9 points to 7751,77 points). There is still the S&P 500 index, which includes companies with the largest capitalization during five years increased by 42% (c 2007,71 points to 2847,11 points). Or Dow Jones industrial average — an increase of 49.5% (137,36 from 17 points to 25 628,9 points).
Now look at the Russian indices, which reflect the value of Russian companies, which offers the Central Bank to invest nonprofessional investors. For example, the RTS index over the five years grew by 8.4%. Index Masuri, which was formerly known as the MICEX index for the same five years has grown by 95%. However, at the end of 2017, the Central Bank changed the rules of the formation of this index. In may of this year, Forbes magazine analyzed the stock returns of companies from the index Mosuri for 2018. The best indices were the shares of “Tatneft” (69% for ordinary shares and 65% for preferred), NOVATEK (66%) and “Surgutneftegaz” (65%). The worst results were shares of Mechel (-51%), Magnit (-43%) and “Tape” (-38%).
In this article analysts point out that in Russia the share price of the company is difficult to predict because of possible sanctions, the various initiatives of the authorities, the low rate of economic growth. And a large part of the index of Mosuri are exporting companies that depend on exchange rates. In the US stock and indices largely depend on economic rather than political factors.
Who will get the money of investors
What happens if the amendments to the law will be taken? Anyone who wants to increase their savings, and stocks of Western companies, as we have seen, give this possibility. Formally, the restrictions do not prevent non-qualified investors to invest in shares of foreign companies. They were forbidden to do it through Russian brokers. But there is almost no difficulty to do it through foreign brokers. The foreign brokers to operate outside the Russian legal field, and in this case, the citizens of Russia are not only the risks of investing in stocks, but the risk that their interests will not be fully protected in the event of disputes with brokers.
The part of Amateur investors will probably prefer other financial instruments that promise them high returns. For example, the Forex market is the game on exchange rates. Risks such a tool disproportionately more than the investment in shares of foreign companies.
Will there be restrictions to what people would be more invested in shares of Russian companies? It is unlikely that this growth will be significant, if it is. People investing their money, they want predictability. But the Russian market in large extent depends on political factors — the new sanctions or another law can easily bring down the stock. Moreover, funds that invest only in the shares of Russian companies recorded the biggest March 2017 capital outflows.
Most likely, people will find ways to circumvent the restrictions. And the Exodus of investors to other markets will lead to loss of taxes. This is just one of the elements ofshorizatsii economy, which again is fighting CB.
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