Novosibirsk companies that issue corporate bonds control more than half of this sector in Siberia. Residents of the Novosibirsk region actively open and use broker’s accounts.
According to the Siberian branch of the Central Bank of Russia, 17 out of 29 Siberian companies whose bonds are circulating on the stock market are registered in the Novosibirsk region. As of the first quarter of this year, Siberian companies had issued more than 5 bln rubles ($69.38 mln.) worth of corporate bonds.
“Five Novosibirsk issuers belong to the growth sector of the Moscow Exchange, which was created to help small and mid-cap firms attract money. The growth sector gives priority to industrial companies that show better financial performance and can expect government subsidies and support from development institutions,” said Nikolay Morev, head of the Central Bank Siberian branch.
Novosibirsk corporate bonds are more profitable than securities of the Russian Finance Ministry and certain large companies. One issue is worth 50 mln ($693,750) to 500 mln rubles ($6.94 mln) with coupon payments of 1% - 16,5%, depending on whether the payments are monthly or quarterly.
The Central Bank pays much attention to the development of corporate bonds in the country as a tool for companies to access liquidity. Director of the Central Bank Financial Market Develpment Department Elena Chaykovskaya said at a conference in Nizhny Novgorod in 2017 that “bonds are a promising tool to develop the real sector of the economy as a complement to bank loans. This market is attractive to the issuers due to a large base of investors and credit reports. Investors, in turn, get the diversification of investments and the possibility of refinancing. It is important that companies make a conscious choice when choosing financing instruments. They should correlate their needs with their capabilities and understand when they benefit from working with bonds and when they benefit from bank lending.”
Private investors on the lookout
Novosibirsk residents supported last year’s tendency where the investors started switching to the stock market. As of the beginning of the year, Moscow Exchange had 5 million new private clients. In total, it is more than in all previous years.
Novosibirsk region residents’ open broker’s accounts which made up 200,000 in the beginning of 2020 increased by 2.2. times by late 2020. In the first quarter, the growth reached almost a record-breaking 33%. In the second one, there was a slight standstill which was compensated by the third and fourth quarters.
In the Siberian Federal District, the Novosibirsk region is second only to the Krasnoyarsk territory by the number of broker’s accounts. In total, there were 1.1 million broker’s accounts in the SFD at the beginning of the year.
Brokerage service implies that investors themselves choose when and which securities to sell or buy. People who did not have time to do so transferred their money to securities trust management. As of December 31, 2020, more than 12,000 accounts had been opened for this purpose, up 1.5 times from early 2020. With this method of passive investment, the client's funds are managed by a professional securities market participant. It is a trustee who selects an investment strategy based on the client's risk profile and invests funds in certain securities.
“Unfortunately, the investment boom presented many opportunities for brokers, trust managers, or bank managers to drag inexperienced people into buying complex or multi-level products with very high risks. To protect unqualified investors from this unfair practice, the Central Bank banned brokers from selling complex instruments to people who had no or a little experience until October 1, 2021. After that date, they will be able to make these deals, but only if they have successfully passed a special test on the product that they are going to buy. If the result is unsatisfactory, the broker will have to refuse the transaction. Of course, an investor will still have the right to insist and buy a complex product, but the transaction will be limited to 100,000 rubles ($1,387.50) or one piece of a financial product if its value exceeds this sum. Besides, the client will be obliged to write a statement to the broker that he is aware of all the risks and is ready to bear them,” said Evgeny Khatskevich, head of the Economics Department of the CBR Siberian branch.
Banks are eager to make extra money, but unfortunately, they often use dishonest tricks, such as misselling, when one financial product is passed off as another, less risky.
The CBR Siberian branch reported an almost two-fold decrease in the number of complaints about misselling from Novosibirsk region players.
Sergey Zhabotinsky, deputy head of the CBR Siberian branch, explained that banks more often offer investment products instead of deposits whereas earlier they offered add-on insurance.
A quarter of Novosibirsk residents complained that instead of a deposit they got the services of a trust manager, and as many said that they received shares in investment funds instead of a deposit. Bankers often sell people investment life insurance policies that seem unnecessary.
“Most investment products are sold through banks, but not all people become investors consciously. If a manager persuades you to replace your deposit with another financial instrument with a higher yield, without explaining all the details, do not agree to it promptly,” Zhabotinsky told wek.ru.