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Barrier-free sphere: new foreign investors will be able to withdraw funds invested in the Russian Federation
The Finance Ministry and the Bank of Russia have developed an initiative according to which new foreign investors will be able to withdraw funds that they will invest in Russia, Finance Minister Anton Siluanov said. At the same time, such a measure will affect even representatives of unfriendly countries. How this decision will affect the Russian investment market and how much funds will be raised can be found in the Izvestia article.
Changing the atmosphere
Theoretically, the solution will undoubtedly increase the attractiveness of foreign investment, Andrey Stolyarov, Deputy Head of the Basic Department of Financial Market Infrastructure at the Faculty of Economics at the National Research University Higher School of Economics, told Izvestia.
"But there are two buts. First, how it will be framed. Will it affect old investors or will it spread only to new ones? What will be the withdrawal conditions? Secondly, the Russian market is quite large. But will there be an influx of funds from foreign investors from unfriendly countries after the stabilization of the foreign policy situation? Or will it take place informally (as with the purchase of Mars warehouse real estate)? As for foreign investors from friendly countries, they still have no restrictions," he said.
The decision is generally correct, since capital flows should be more or less free, then this will ensure the influx of foreign investment into the country, Sergey Grishunin, managing director of the NRA rating service, agreed in an interview with Izvestia. In his opinion, the free movement of capital is important for the Russian stock market, and without foreign investors, a rapid doubling of the financial market looks unrealistic.
— Investors will refuse to work on the Russian stock market if they cannot withdraw profits. It is noteworthy that, according to NRA calculations, during the period with a high share of foreign investment in the Russian stock market, the highest incomes in this market were observed," he stressed. — Despite the horror stories that foreign investors would "wash out" all profits from the market due to the large scale of activity and technological advantage, this turned out not to be the case. All stock market participants have succeeded.
After the withdrawal of foreign investors from the Russian stock market, yields declined and it became much more difficult to beat the index. The expansion of the pie, as it turned out, contributes to the enrichment of all participants. As for direct investments, investors certainly need a free withdrawal of dividends. However, it is necessary to deal with the sudden exodus of investors in a different way — to coordinate only those projects that really lead to technology transfer and the subsidization of a significant share of income in Russia.
Market prospects
All other things being equal, such a decision should have a positive impact on the investment market and the investment climate in Russia for two reasons, Dmitry Borodin, associate professor of Finance at the Bauman Moscow State Technical University, told Izvestia.
— Firstly, the guarantees will ensure the attraction of foreign investors and the influx of new money into the stock market, and therefore increase the liquidity of our market, which always improves its attractiveness and efficiency. All participants will benefit from the increase in liquidity, including domestic investors (it becomes easier for them to sell their assets) and issuers (there is more demand for new issues of securities), the expert confirmed.
Secondly, in his opinion, such a change in legislation is a signal to all investors that the market is following the path of liberalization, reducing barriers to entry and exit, and this increases its investment attractiveness.
As for the possible amount of funds that will be raised, according to Borodin, everything is more complicated here, since the final effect will not be instantaneous, and much will depend on how much and how quickly investors believe in such an improvement in working conditions in the market.
— At first, the result may be insignificant, because foreign investors will carefully study the legislation and assess the risks of entering the Russian market. Therefore, I would not be too optimistic that we will be able to significantly increase the amount of funds immediately," Dmitry Borodin is confident. — The potential of such a solution is huge, it may be a multiple effect relative to current trading volumes and capital, but we will not see it immediately.
Now it is difficult to talk about the possible amounts of funds that will be raised when taking this measure, Lazar Badalov, associate professor at the Faculty of Economics of the RUDN University, confirmed to Izvestia. In his opinion, given the negative geopolitical situation and pressure from Western countries, even if there are investors in unfriendly countries, they will not advertise and disseminate information about their interest. At the same time, no one from the Russian side will disclose this information, again, bearing in mind the protection of the interests of such investors.
— These changes are aimed at supporting the investment climate as much as possible in the current situation. The Russian authorities are trying to demonstrate that the Russian market remains open to investors, regardless of which country they are from. This has been repeatedly stated by government officials, including the President of Russia.: no one has anything against business, and everyone understands everything perfectly," the expert noted.
The decision of the Ministry of Finance and the Central Bank will not have any serious impact on the investment market, Daniil Petukhov, associate professor of the Department of National Economics at the Presidential Academy, told Izvestia. Attracting investments to the country is much more influenced by the level of uncertainty, which is now extremely high in Russia.
— Of course, this measure, theoretically, should help attract investment, but in practice it is unlikely to be effective, — the expert emphasized.
Izvestia sent a request to the Central Bank and the Ministry of Finance, but no responses had been received at the time of publication.
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