Russian financial markets: retail investors looking for foreign assets

RUSSIA ECONOMICS - Report 28 Aug 2020 by Evgeny Gavrilenkov and Alexander Kudrin

The rapid decrease of interest rates in both Russia and the US in the first half of the year fueled the inflow of private investors’ money from banking deposits into the financial markets. As a result the aggregate amount of household funds in brokerage accounts and in asset management companies doubled during last 18 months and reached R4 trln. Interestingly, hard currency bonds and international shares represent about 35% of the total holdings, while investments into OFZs – less than 5%, and the latter notional amount declined by 30% during 1H20. The potential for further growth of household investments into securities remains in place given that the total amount of retail deposits exceeds R31 trln. If the pace of fund relocation is high, then at a certain point it may create a problem for the banking system and cause growth in deposit rates.

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