Coronavirus Boosts Stock Market Activity

Coronavirus Boosts Stock Market Activity

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A representative of the Volgo-Vyatsky Department of the Central Bank of Russia told wek.ru that last year, "a record-breaking number of novice investors without special knowledge or experience" entered the Russian financial market. According to the Moscow Exchange, the turnover on individual investment accounts (IIA) of Nizhny Novgorod region residents doubled to 26.7 bln rubles ($363.79 mln.)

This figure is record-breaking to date: in 2015-2016, IIA annual turnover in Nizhny Novgorod was about 150 mln rubles ($2.04 mln.)

Last year saw a two-fold increase in IIAs in the Nizhny Novgorod region from 2019: 69,900 vs 33,600, respectively.

The Volgo-Vyatsky Department of the Central Bank said that investors had flocked to the stock market to keep the profit margins in the "conditions of falling rates on bank deposits" even despite higher stock market risks.

Probably, it also happened due to the coronavirus pandemic as the economic situation and financial health of many Russians worsened. People needed a new source of income and turned to the stock market. (The win/loss ratio is currently ignored).

Private Nizhniy Novgorod investors have remained active this year. During the first quarter, they opened 7,700 IIAs with the turnover amounting to 8.3 bln rubles ($113.09 mln.)

Nizhny Novgorod IIAs totaled 76,600 in the first three months of the year. According to the Moscow Exchange, the Nizhny Novgorod region is 14th in Russia in terms of IIAs opened in the first quarter of 2021. The first three largest investors are Moscow, the Moscow region, and St. Petersburg.

IIA Top Ten includes both banks and management companies:

Sberbank 39,500

Tinkoff Bank 14,700

VTB 9,300

BCS 3,800

Otkritie Broker 2,600

Finam 1,500

Alfa Capital 1,400

Septem Capital 0,800,

Gazprombank 0,700

PSB 0,500.

Nizhny Novgorod IIAs transaction structure is similar to the national structure: 85% shares, 8% bonds, and 7% exchange-traded funds, Moscow Stock Exchange Equity Market Department Director Boris Blokhin told wek.ru.

Seventy percent of private Nizhny Novgorod investors are men in the 35-45 age group who prefer short-term transactions.

The role of remote services increased during the COVID-19 pandemic. Stock market players are actively upgrading mobile applications and launching online assistants.

According to the experts of the Volgo-Vyatsky Department of the Central Bank, there was mis-selling last year, when one financial instrument was presented as another, more simple and reliable.

"The monitoring by the Central Bank showed that in 2020, the Russians were actively offered complex and risky financial instruments whose specifics and risks could not be adequately assessed even by experienced investors. Consumers might choose such products thoughtlessly and unconsciously. Mis-selling is the practice where banks offer investment products as "deposits with higher profit margins" or together with deposits. Clients are not informed about the differences between savings products and investment instruments. For example, they are not told that income on investments is not guaranteed, that in case of early termination of a contract, the investor is likely to take losses, or that investments are not insured by the state. Often, people do not even know that they have become investors. They believe that they have purchased a deposit with higher profit margins.”

In Russia, IIA 1Q turnover totalled 449.7 bln rubles ($6.13 bln.)

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