Cautious exit: Russia expects an influx of foreign investors
The Russian market is expecting an influx of foreign investors in 2025, as "greed wins," Deputy Finance Minister Alexei Moiseyev said at a parliamentary hearing in the State Duma. In addition, the Finance Ministry and the Central Bank have prepared a draft presidential decree that provides new investors with guarantees on Russian stock exchanges. This measure will help to increase the market capacity, according to the agencies. Izvestia has analyzed which states are planning to invest in Russia and which sectors of the economy will be the most attractive for investments.
Situation on the Russian stock market today
Alexander Shneiderman, Head of Sales and Client Support Department at Alfa-Forex, is sure that the new wave of investors will be more picky in choosing companies and industries to invest in Russia.
- We can divide these areas into two groups. The first is the industries that are in acute demand in the domestic market of Russia, especially those that serve other industries and will always be in demand due to diversification. For example, the low-end chemical industry or the automobile industry. As for investors, the most likely contenders are representatives of the Middle East and China," Alexander Shneiderman told Izvestia.
The second group includes industries that are safe for export development and whose products are not subject to sanctions. These are production of fertilizers or foodstuffs, as well as medical products. At the same time, the share of investors who prefer silence instead of media coverage will grow, he believes.
According to Andrei Petrov, Director of Client Relations at BKS Investment World, if there will be an inflow of foreign investors, it will be only from friendly jurisdictions and if the geopolitical picture does not change.
- Experience shows that periodically investors from India, China and Middle East countries show interest in investing in the Russian stock market, but it almost never comes to concrete actions," he told Izvestia.
According to the expert, foreign investors may be interested in the operations of carry-trade (interest arbitrage) to earn on the current high ruble rate, if such an opportunity is available. Also of interest to them are export-oriented sectors, as they can offer quasi-currency yields: these are the oil and gas sector, non-ferrous metallurgy, ferrous metallurgy and, possibly, the financial sector.
The volume of investments is still quite difficult to estimate, as at the initial stage everyone will enter the Russian market with caution, says Andrei Petrov. However, the potential of such investors may be almost limitless compared to the volume of the domestic market: historically, it was non-residents who were the main holders of all free-float (free-float shares).
What awaits the stock market in 2025
Today there is a gradual change in the attitude of unfriendly countries towards Russia, says Boris Gladkikh, a deputy of the State Duma.
- If at the beginning of the outgoing year the European Union vetoed interaction with financial instruments, we are already seeing an influx of foreign investors. Following the results of the US elections, the European news agenda has been reoriented to modern realities," the politician told Izvestia. According to him, the success and importance of BRICS is obvious, as well as the dollar's displacement from the pedestal of currency trade.
At the same time, the flurry of bankruptcies that have engulfed NATO countries, while in Russia GDP is growing and problems with import substitution are being solved, gives an unambiguous signal to eurozone investors that Russia remains a strong market player.
Recall, according to the Eurostat report, the second quarter of 2023 was the absolute record for bankruptcies in the EU. This affected all sectors of the economy, but representatives of the hotel and restaurant business suffered the most.
Moscow's strong ties with China and Iran, as well as plans to impose surcharges on imported goods in the US are changing the global approach to asset valuation, said Boris Gladkikh.
- We expect an inflow of European investors. Also, we should not forget about the work done with countries in Africa, Latin America and Asia. A marker of the projected cash flow is the announcement of a country to change its status in relation to BRICS," he said.
According to the politician, if a state accepts the status of a partner of the organization, it is safe to say that local investors are given the green light to buy shares from Russia. Historically, the mining and manufacturing sectors of our country have been the most attractive for foreigners, and the trend is expected to continue.
- It is difficult to speak about the ceiling for investments, as any geopolitical change in the world can change the situation dramatically. Everyone is waiting for the first steps of US President-elect Donald Trump after January 20, 2025. They may have a direct impact on the market," says Boris Gladkikh.
The largest inflow of investors to Russia is likely to come from countries that support a pragmatic approach to economic relations, including the states of Asia, the Middle East and Latin America, agreed Kirill Chernovol, a researcher at the Russia-OECD Center of the IPEI of the Presidential Academy.
- This is due to their interest in diversifying their capital investments and expanding their presence in emerging markets. In particular, it may concern the countries actively cooperating with Russia within the framework of alternative financial mechanisms and settlements," the expert explained to Izvestia.
According to him, investments will be concentrated in strategic sectors: energy, metallurgy, transportation infrastructure and information technologies. Digital financial assets, including DRM and CFA, as well as gold, which is gaining a new status in international settlements and reserves, may be of particular interest. Emerging technologies associated with the digitalization of financial instruments are also creating prospects for raising capital.
- The volume of investments will depend on the speed of adoption and implementation of incentive measures, such as guarantees for investors and tax incentives. Given the announced initiatives, we can assume that we will be talking about billions of dollars of portfolio investments, especially if interest in Russian instruments continues to grow," he added.
"Izvestia" sent an inquiry to the Ministry of Finance, but at the time of publication no response had been received.
